Mexico annual inflation accelerates above expectations during September

The national flag flutters atop the Bank of Mexico building in downtown Mexico City. PHOTO: REUTERS/Edgard Garrido

Mexico’s annual inflation rose during the first half of September, the national statistics agency said on Thursday, above forecasts and prompting expectations of a new rate hike.

By mid-month, consumer prices accelerated 0.42% to reach annual inflation of 5.87%, already edging above the 5.59% clocked for August.-

The closely watched core price index, which strips out some volatile food and energy prices, climbed 0.31% in early September to reach 4.92%, the highest level since late 2017, according to data from the statistics agency INEGI.

The acceleration in the first half of September was above analyst expectations that annual inflation would rise to 5.72%, according to a Reuters poll of economists on Sept. 20.

Consumer prices have been edging down since April, when inflation stood at 6.08%, but are still far from the central bank’s target rate of 3% plus or minus one percentage point.

The renewed acceleration could prompt the Bank of Mexico to continue its tightening cycle at its meeting next week, according to Nikhil Sanghani, an economist for Capital Economics.

“(Banxico) has indicated that it will continue to hike rates in the face of above-target inflation to prevent expectations from rising,” Sanghani said in a note.

“We still think it will move slowly, with another 25bp hike to 4.75%,” he said.