Mexico: Inflation soars as gasoline price hike bites in January
February 9, 2017
A gasoline price hike sent Mexico’s inflation soaring in January, continuing its climb above Banxico’s target rate of 3.0%. Consumer prices rose by a staggering 1.70% from a month earlier, ahead of market expectations and a multi-year high. January’s jump followed a 0.46% increase in December. According to the National Statistics Institute (INEGI), the monthly increase was mostly on the back of a government-mandated 14.0% hike in regular gasoline prices.
Inflation rose considerably in January, from 3.4% in December to 4.7% and marked the fastest rate in more than four years. The figure far exceeded the 4.0% upper bound of the Central Bank’s target range, and likely set the stage for an interest rate hike.
Meanwhile, the closely-watched core consumer price index—which excludes volatile categories such as fresh food and energy—increased 0.58% in January from the previous month, which was its highest reading in three years and came in above the 0.45% rise in December. As expected, prices for core goods led the increase, sent higher by the weak peso. Core inflation climbed to 3.8% in January from 3.4% in December.
After spending most of 2016 below the Central Bank’s target, 2017 looks to be a year in which inflation may need containing. The prices of imported goods are increasingly affected as the peso continues its slump—especially against the dollar. Monetary officials are likely to raise interest rates as pressure mounts to curb growing prices.
Author: Christopher Thomas, Economist