Mexico Annual Inflation Cooled to a New Record Low in Early August

Mexico’s annual inflation rate cooled in early August to a new record low, giving policymakers room to hold interest rates low despite a steep slide in the peso.

Inflation in the 12 months through mid-August cooled to 2.64 percent from 2.74 percent in the full month of July, the national statistics institute said on Monday. A poll of analysts by Reuters had forecast the rate would ease slightly to 2.70 percent.

Inflation is expected to remain below 3 percent for the rest of the year, but the central bank is still forecast to raise interest rates when U.S. borrowing costs move higher, even though Mexican economic growth is sluggish and the peso is weak.

Mexico’s peso has hit a series of record lows against the dollar, most recently weakening past the 17 per dollar level on Sunday, on sinking oil prices and market fears over the Chinese economy.

Central bank governor Agustin Carstens said last week that the bank will do everything possible to keep inflation low and stable in the face of the currency’s depreciation. .

He had previously warned the bank could raise interest rates at any time, even before the Fed, if the peso needs support.

The Mexican data showed that consumer prices rose by 0.12 in the first half of August. The analysts’ poll had forecast a 0.17 percent increase.

The core price index, which strips out some volatile food and energy prices, climbed 0.12 percent in early August, compared with expectations for 0.15 percent.

The 12-month core inflation rate came in at 2.29 percent. A rate of 2.32 percent had been forecast.
(Reporting By Alexandra Alper Editing by W Simon)



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