Mexico: Inflation reaches eight-month high
February 7, 2014
In January, consumer prices jumped 0.89% over the previous month, which came in above the 0.57% increase observed in December. The increase undershot the 0.97% rise the market had expected and was mainly the result of new taxes, which pushed up prices for food and non-alcoholic beverages, (particularly soft drinks) tobacco and fuels.
Consequently, annual headline inflation rose from 4.0% in December to 4.5% in January, which marked the highest rate since May 2013. Inflation now sits above the Central Bank's inflation target of 3.0% with a 1.0% tolerance margin. Meanwhile core consumer prices - which exclude prices for fresh food, fuels and regulated prices - increased 0.85% over the previous month (December: +0.33% month-on-month) pushing annual core inflation to 3.2% in January (December: +2.8% year-on-year).
The Central Bank indicated that it expects inflation to end 2014 near 3.5%, thus remaining above the long-term inflation target of 3.0%. LatinFocus Consensus Forecast panelists expect inflation to end 2014 at 3.8%, which is up 0.1 percentage points over last month's forecast. For 2015, the panel sees year-end inflation at 3.4%.
Author: Ricardo Aceves, Senior Economist