Mexican headline inflation and the closely watched core index rose in April to their highest levels since January 2001, official data showed on Monday, May 9th, that the situation is likely to prompt the central bank to hike its key interest rate again this week.
Consumer prices rose 7.68% in the year through April and in the month alone increased 0.54%, according to non-seasonally adjusted figures, the INEGI national statistics agency said.
The annual figure was still far above the Bank of Mexico’s target of 3%, plus or minus one percentage point, and compares to forecasts of 7.72%, according to a Reuters poll.
Banxico, as the central bank is known, has increased the benchmark interest rate by 250 basis points over its last seven monetary policy meetings to 6.50% as it has struggled to contain rising inflation.
“Ongoing inflation risks, alongside the more hawkish U.S. Fed, will put pressure on Banxico to continue its tightening cycle,” said Nikhil Sanghani, emerging markets economist at Capital Economics.
Sanghani expects Banxico to hike the key rate by 50 basis points to 7.0% this week.
The closely-watched core index, which strips out some volatile food and energy prices, rose 0.78% during the month and surged 7.22% in the year through April.
Mexican President Andres Manuel Lopez Obrador said Monday he expected inflation to begin easing and suggested that an end to Russia’s war in Ukraine would go a long way to moderate inflationary pressures.
“The most important thing would be for a peace agreement to be reached between Russia and Ukraine. That would help a lot because that is what precipitated the economic crisis,” Lopez Obrador said in a regular news conference, adding that spiraling inflation was a “global phenomenon.”
The conflict in Ukraine has been driving food and energy prices higher worldwide.
Mexico’s government last week announced it will increase the production of staple foods such as corn, rice, and beans as part of a plan agreed with business leaders to control consumer price inflation.
Source: El Financiero