Mexico’s inflation rate slows for sixth straight month
2023.08.09 09:31
© Reuters. Employees work at a stall in an outdoor market dedicated to the sale of fruits and vegetables, in Ciudad Juarez, Mexico July 27, 2023. REUTERS/Jose Luis Gonzalez
MEXICO CITY (Reuters) – Mexico saw its annual inflation rate slow for the sixth consecutive month in July to 4.79%, data from statistics agency INEGI showed on Wednesday, continuing a downward trend spurred by a long cycle of interest rate hikes.
Headline inflation was in line with a market forecast of 4.79%, which was more than a two-year low, after it rose to a record 8.7% last year.
Consumer prices rose 0.48% in July from June, according to non-seasonally adjusted figures, against an expected drop of 0.49%.
The closely watched core price index, which strips out some volatile food and energy prices, rose 0.39% during the month.
Annual core inflation in July, considered a better gauge of price trends because it excludes some highly volatile items, was 6.64%, below the estimated 6.68% and the lowest level since February 2022.
Mexican central bank board member Jonathan Heath said last week in a podcast that he believed the benchmark interest rate was at the correct level, and that the central bank does not want to raise it again even in the face of more U.S. rate hikes.
Deputy Chief Emerging Markets Economist at Capital Economics Jason Tuvey said headline inflation rate continued to drop but “services inflation is proving to be sticky”.
He added that he did not expect the central bank to turn to interest rate cuts until the turn of the year.
Chief Latin America Economist at Pantheon Macroeconomics Andres Abadia said underlying inflation pressures were falling due to factors such as a “solid performance of the Mexican peso over the last few quarters, falling inflation expectations, and low input costs” which would allow policymakers to cut rates from Q4 onwards.
The Bank of Mexico, which has an inflation target of 3% plus or minus one percentage point, in late June voted to keep its benchmark interest rate steady at a historic high of 11.25%, suggesting it might need to keep it there for an extended time as it seeks to bring inflation down to its target.
The central bank will announce its next interest rate decision on Thursday.
