Inflation Mexico shoots to the highest level in 20 years, pressures a new rate hike

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Inflation Mexico shoots to the highest level in 20 years, pressures a new rate hike




File photo. People at Jamaica Market in Mexico City


© Reuters / GUSTAVO GRAF MALDONADO
File photo. People at Jamaica Market in Mexico City


MEXICO CITY, Nov 24 (Reuters) – Mexico’s year-on-year inflation accelerated in the first half of November above expectations to its highest level in more than two decades, reinforcing expectations that the central bank would rise by a fifth consecutive occasion your benchmark interest rate next month.

The National Consumer Price Index (INPC) advanced 7.05%, compared to 6.36% in the second half of October, the statistical institute INEGI reported on Wednesday. This is its highest record since April 2001.

Analysts consulted in a Reuters poll projected biweekly annual inflation to accelerate to 6.87%. Meanwhile, year-on-year core inflation grew at a rate of 5.53%, its highest level since April 2009 and higher than the 5.42% expected by the market.

“The strength of this inflation data will put pressure on Banxico to act more aggressively to quell inflation. But for now, we believe its tightening cycle will continue to be gradual,” said Nikhil Sanghani, emerging markets economist at Capital Economics .

Banco de México (Banxico) this month raised its benchmark interest rate by 25 basis points (bp) for the fourth time in a row to 5%, and raised its expectations for inflation at the end of this year.

Banxico’s next monetary policy announcement, the last of a total of eight for the year, is scheduled for December 16. Banxico has a permanent inflation target of 3% +/- one percentage point.

In the first 15 days of November alone, consumer prices rose 0.69%, while the underlying index increased 0.15%, INEGI said.

The increase in inflation was driven by price increases for some agricultural products and electricity rates.

(Report by Miguel Angel Gutiérrez)

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