Mexico: Inflation falls to lowest level in nearly four years
February 9, 2015
In January, consumer prices fell 0.09% over the previous month. The reading contrasted the 0.49% increase registered in December and was slightly below the 0.07% drop the markets had expected. The monthly drop reflected lower fresh food prices and also prices for telecommunication services, particularly due to the elimination of national long-distance tariffs and the reduction in prices for international long-distance calls and fixed-line phones. According to analysts, the adjustment in telecommunication services was faster than expected, reflecting stronger competition in the telecom sector. Moreover, pass-through effects from the depreciation of the Mexican peso are still not visible.
Annual inflation fell from 4.1% in December to 3.1% in January and marked the lowest level since March 2011. Inflation returned to the Central Bank’s inflation target of 3.0% with a tolerance 1.0% tolerance margin after having remained above it since July 2014.
Core consumer prices—exclude volatile categories such as fresh food and energy—fell 0.03% in January over the previous month, which contrasts the 0.23% increase tallied in December. Annual core inflation fell from 3.2% in December to 2.3%% in January.
Author: Ricardo Aceves, Senior Economist