Mexico: Inflation keeps drifting higher in February
March 9, 2017
Consumer prices in Mexico firmed 0.58% from a month earlier, a touch above the 0.55% increase the markets had expected. February’s increase followed the 1.70% jump in January, which had resulted from the hike in gasoline prices (gasolinazo). Notably, February’s increase was solely the result of a spike in core prices and this should continue in the coming months due to the pass-through from a weaker peso.
Inflation rose from 4.7% in January to 4.9% in February, marking the highest level since March 2010. Inflation now remains above the 4.0% upper bound of the Central Bank’s target range, and is expected to remain there for most of the year.
The closely-watched core consumer price index—which excludes volatile categories such as fresh food and energy—jumped 0.76% in February from the previous month, which was its highest reading in more than three years and came in above the 0.58% rise in January. Core inflation jumped from 3.8% in January to 4.3% in February, the highest rate seen since March 2010.
Coupled with expectations that the U.S. Federal Reserve will increase interest rates in March, the deterioration in core and headline inflation is likely to drive the Central Bank to act at its late March monetary policy meeting and hike interest rates.
Author: Ricardo Aceves, Senior Economist