Inflation in Mexico is accelerating faster than expected, rising to 3.61% during the first two weeks of November compared to the same period last year, according to data released by the national statistics agency, INEGI, on Monday.
While core inflation, which excludes volatile food and fuel prices, stayed steady at 4.32% due to downward pressure from the El Buen Fin discount shopping campaign, the non-core index accelerated to 1.29% annually, from 0.80% in the second half of October.
Livestock prices and government-authorized tariffs drove the increase in these prices.
The rise in prices was reflected in the cost of food consumed outside the home (lunch counter prices rose 0.47%, restaurant prices were up 0.51% and prepared foods climbed 0.61%), tomatoes (up 3.98%) and air transport (up 4.6%).
Also, electricity prices soared by 20.7% following the end of a government subsidy program in 18 cities.
Mexico’s central bank (Banxico) had predicted that the current weakness of Mexico’s economy would reduce inflation, but the news agency Reuters reported that underlying price pressures pushing stubborn core inflation are a pressing concern.
In a social media post, analyst Gabriela Siller cautioned that core inflation, “which determines the trajectory of overall inflation in the medium and long term,” is not likely to decelerate any time soon.
“[This] implies that, if the rebound currently observed in non-core inflation persists, overall inflation would once again exceed 4%,” she said.
Banxico targets inflation at 3%, with a margin of error of ±1 percentage point.
Despite the worrisome inflation figures, Citibank analysts cited by Reuters expect Banxico to reduce their benchmark interest rate by 25 basis points at their next board meeting on Dec. 18.
Mexico’s gross domestic product contracted in the third quarter, a slowdown that most members of Banxico’s Board of Governors believe will help ease price pressures, according to the minutes of their Nov. 6 interest rate decision.
With reports from Bloomberg News and La Jornada
