A key Mexican inflation metric accelerated beyond expectations in early October, keeping pressure on the central bank even as headline price increases may have peaked.
Core inflation, which excludes volatile items like fuel, sped up to 8.39% in early October from a year prior, the national statistics institute reported Monday. The result was above the 8.29% reading in late September and outpaced the median estimate of 8.32% reported by analysts in a Bloomberg survey.
“Core inflation reflects how entrenched inflation is,” said Pamela Diaz Loubet, a Mexico economist at BNP Paribas. “While non-core price pressures and shocks begin to fade, core inflation shows how those shocks have already created second-order effects.”
Overall, consumer prices rose 8.53% annually, below the 8.64% increase seen in the previous two weeks and under the 8.62% median estimate. On a biweekly basis, prices gained 0.44%, compared to a 0.53% forecast.
“It seems inflation might have peaked in the second week of August,” since the headline figure has now fallen in three straight bi-weekly inflation prints, said Janneth Quiroz Zamora, vice president of economic research at Monex Casa de Bolsa.
Mexico’s central bank, known as Banxico, targets inflation of 3%, plus or minus 1 percentage point.
Banxico raised rates last month to 9.25%, the highest since it started targeting inflation in 2008. The 75 basis-point boosts continued its run of matching the US Federal Reserve’s increases. The board appeared divided in minutes of the meeting published in October, with one member calling for a smaller hike in November, while another said a bigger increase may be needed.
Source: El Financiero