Mexico’s annual inflation quickened more than expected in early June, boosting speculation that the central bank will accelerate the pace of interest rate increases later Thursday, June 23.
Consumer prices rose 7.88% in the first two weeks of the month from a year earlier, above all economist forecasts in a Bloomberg survey that had a median estimate of 7.73%, the national statistics institute reported Thursday. On a bi-weekly basis, prices increased 0.49%, above the 0.35% median projection.
Core inflation, which excludes volatile items such as fuel, rose 7.47% in the same period, more than analysts’ median estimate of 7.32%. The central bank’s eight straight interest rate hikes totaling 300 basis points since last June have so far done little to slow headline and core readings. The bank, known as Banxico, targets inflation of 3%, plus or minus one percentage point.
Later on Thursday, June 23, Banxico, led by Governor Victoria Rodriguez, is expected to raise its key rate to 7.75% from 7%, which would be its biggest interest rate increase since it started an inflation-targeting regime in 2008. All 27 economists surveyed by Bloomberg coincide with the forecast.
The US Federal Reserve also increased borrowing costs by 75 basis points in its last decision, adding pressure for Banxico to do the same.
“This bad statistic is much worse than what we’d expected. It doesn’t change the decision today,” said Jessica Roldan, chief economist at Casa de Bolsa Finamex. “We’d expected the interest rate increase was going to be aggressive, and the only thing this confirms is the baseline scenario, that Banxico will follow the Fed.”
Source: El Financiero