Mexico’s inflation slowed more than expected in February, suggesting the central bank may have some policy leeway at this month’s rate-setting meeting.
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Consumer prices accelerated 7.62% in February in year-on-year terms, below 7.91% in January, the national statistics institute reported Thursday.
The reading was below the median estimate of 7.68% of economists surveyed by Bloomberg.
Core inflation, which excludes volatile items such as fuel, slowed to 8.29%, below the 8.45% registered in January and the median estimate of 8.35%.
The measure, which is closely watched in Mexico, had slowed in December for the first time in two years.
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“Merchandise inflation has been in the double digits, but in January and February it started to slow down. This has to do with the improvement we are seeing in international prices,” said Janneth Quiroz Zamora, vice president of economic research at Monex Casa de Bolsa, before the release of the data. “What is worrying is the inflation of services.”
Consumer price increases peaked at 8.7% in September but stalled in the three months to January, This put pressure on the central bank -known as Banxico- to stand firm in its aggressive monetary tightening campaign.
Since June 2021, central bankers have raised the benchmark rate in 14 consecutive meetings – by a total of 700 basis points to a record 11% – to combat inflation, and board members have raised concerns about the underlying inflation path.
The bank is expected to raise borrowing costs again later this month after surprising markets with a higher-than-expected rate hike of 50 basis points at their last meeting in early February.
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The United States Federal Reserve it had raised its rates by a quarter of a point a week earlier, leading analysts to forecast that Banxico would match its northern neighbor for the seventh straight decision.
Economists expect inflation in Mexico to end 2023 at 5.30%, according to a survey published this week by Citibanamex, compared to a forecast of 5.02% in early January.
They forecast interest rates of 11.5% at the end of the year, 125 basis points above the forecast obtained in the survey at the end of December, and they expect the economy to grow 1.4%, compared to the 0.9% projected for early January.
Bloomberg
