Economy

Inflation in Mexico rises to its highest level since 2017

This makes it less likely that Banxico, which targets 3% inflation with a margin of error of one percentage point up or down, will cut its main interest rate on May 13

Reuters

22.Apr.2021 12:50 BRT

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Mexico’s national statistics agency (Inegi) reported that the consumer price index rose to 6.05% in the year through the first half of April;
Inflation has probably peaked and looks set to fall towards the central bank’s target of 2% to 4% in the coming months.

Mexican annual inflation accelerated faster than forecast in the first half of April, reaching its highest level in more than three years and far exceeding the Mexican central bank’s target, official data showed on Thursday.

Mexico‘s national statistics agency (Inegi) reported that the consumer price index rose to 6.05% in the year through the first half of April, due to rising energy and food, beverage, and tobacco prices.

The figure was above the expectation in a Reuters poll of 5.84% and represents the highest level since the 6.85% recorded in the second half of December 2017.

This makes it less likely that the central bank, which targets 3% inflation with a margin of error of one percentage point up or down, will cut its main interest rate on May 13.

“At first glance, this seems alarming, although it was mainly a result of the base effects related to low oil prices a year ago,” said Nikhil Sanghani, Latin America economist at Capital Economics, who sees the central bank maintaining its rate basic to 4.00% “for longer than investors currently expect”.

Also, inflation has probably peaked and looks set to fall towards the central bank’s target of 2% to 4% in the coming months, as the unfavorable base effects of energy prices decrease, added Sanghani.

(Translated by LABS)