Mexico Inflation


Mexico: Inflation ends the year above the Central Bank target but eases in January

January 24, 2011

In December, consumer prices added 0.50% over the previous month, which came in below November's 0.80%, but ahead of market expectations of a 0.39% climb. As a result, annual inflation closed the year at 4.4%, exceeding the 1.0 percentage-point tolerance margin around the Central Bank's 3.0% target. The December price increase was mostly due to higher prices for food, beverages and tobacco, in particular for limes (+76.87% yoy), which are an important part of the Mexican diet. The core inflation index, which excludes volatile categories such as oil, fresh fruits and vegetables, rose 0.47% over the previous month, leaving annual core inflation unchanged at 3.6%. More recent data show that price pressures eased at the beginning of the year. During the first half of January, consumer prices added only 0.17%, well below market expectations of a 0.31% increase and reducing annual headline inflation to 4.0%. The reading was calculated using a new methodology, which represents only a marginal change over the previous one. The most important changes were a new way to compute housing prices and a higher weight in the consumption basket of services compared to goods. Panellists and the Central Bank anticipate inflation to continue moderating in the months ahead.


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