Published On: Thu, Mar 9th, 2017

Mexico’s inflation rate hits seven-year high in February

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Mexican inflation galloped to a seven year high of 4.86 per cent in February compared to a year earlier, higher than market forecasts of 4.54 per cent and setting the stage for the country’s central bank to raise rates again later this month, the Financial Times reported.

The upward trend in consumer prices is no real surprise – after all, they have been climbing steadily, compounded by the peso’s weakness. But the acceleration in inflation and rises in core goods and services “suggests inflationary pressures are generalising/disseminating,” Alberto Ramos at Goldman Sachs wrote in a note to clients, calling it a “significant deterioration of the inflation outlook”.

People wait in line to fill containers with gasoline at a gas station in Oaxaca, Mexico. PHOTO: REUTERS

People wait in line to fill containers with gasoline at a gas station in Oaxaca, Mexico. PHOTO: REUTERS

Core inflation, which excludes fuel and fresh foods, rose by 4.3 per cent from 3.8 per cent year-on-year in January, also a seven-year high. Capital Economics said the increase was being driven by rising inflation across most categories including housing, clothing, health and education. “The only reason the headline rate didn’t rise further last month was a drop in food inflation, which fell from 3.5 year-on-year in January to 2.9 per cent year-on-year in February,” it said. The rise in inflation will reinforce the case for Banxico to go ahead with another rate rise when it meets on March 30.

Capital Economics is expecting Banxico to increase rates by another 50 basis points to 6.75 per cent from the current 6.25 per cent in what would be its seventh half-point rise in a row. The latest market survey by Citibanamex published this week revealed a consensus for a 25bp rise in March – but that was before this inflation number, so the 45 per cent of participants betting on a half-point hike may swell.




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