Friday, June 21, 2024

Inflation continues to fall, reaches 4.79% in first half of July

Annual headline inflation continued to fall during the first half of July, reaching 4.79% according to a report published by the National Institute of Geography and Statistics (INEGI) on Monday. 

The consumer price index rose by 0.29% during the first half of the month, bringing the annual inflation rate down to 4.79% from 5.06% the previous month. This is the lowest level seen in over two years, and on track with the government’s prediction that inflation will reach 4.7% by the end of 2023. However, inflation still has a ways to go downward before reaching the Bank of Mexico (Banxico)’s target rate of 3%.

Bank of Mexico
Bank of Mexico officials have suggested that they plan to stay at the current interest rate of 11.25% for several months in order to get inflation closer to its 3% target rate. (File photo)

Inflation was also slightly higher than analysts’ predictions of 4.77% for this period, according to economists recently polled by Reuters

However, things are looking better than in 2022, when Mexico was seeing unprecedented levels of headline inflation, in line with global trends. In the first half of September of 2022, it reached nearly 9%, prompting the federal government to implement the Packet Against Inflation and Scarcity (PACIC) — a pact with private companies to keep the prices of various basic foodstuffs down. The public-private deal has had a limited impact on headline inflation, however. 

But key interest rate increases by Mexico’s central bank (Banxico), does seem to have been helping Mexico progress: as far back as June of 2021, the central bank began a cycle of rate increases to try and tame rising inflation. Banxico’s rate eventually capped out at a record high of 11.25% in March.

Core inflation, which excludes volatile food and energy prices, remained higher, however, reaching 6.76% during this period, mainly driven by retail prices, which increased by 7.99%. The cost of services also rose, by 5.29%. Non-core inflation decreased by 0.97%, primarily attributed to the decrease in international oil prices.

However, the prices of agricultural products increased: fruits and vegetables saw their costs rise by 5.59%, and livestock prices went up by 0.8%. 

With reports from El Economista

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