Published On: Sun, Mar 26th, 2017

Mexico’s rising inflation prompts hints of more interest rate hikes to come

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Mexican annual inflation rose at its fastest pace in nearly 8 years in early March, prompting central bank chief Agustin Carstens to hint at higher interest rates to combat an inflation “bubble” he said would subside later in the year, Reuters reported.

The headline inflation rate for the year through mid-March was 5.29 percent, the national statistics institute said on Thursday. The figure was the highest since the second half of February 2009, and was above expectations of economists polled by Reuters for 5.25 percent.

Mexico’s central bank raised its benchmark interest rate last month to a nearly eight-year high after a steep hike in gasoline prices and weakness in the peso sparked by Donald Trump’s election as U.S. president.

Just after the data was published, Carstens said the central bank had room to continue adjusting rates.

A general view of a market in Mexico City. PHOTO: REUTERS/Tomas Bravo

A general view of a market in Mexico City. PHOTO: REUTERS/Tomas Bravo

The peso has recovered as U.S. officials have taken a more conciliatory tone toward Mexico and the U.S. Federal Reserve said it would stick to gradual interest-rate increases.

Still, many analysts expect the central bank to lift rates again on March 30 following the Fed as inflation climbs.

The core price index MXCPIC=ECI, which strips out some volatile food and energy prices, rose 4.32 percent in the 12-month period to mid-March.

The figure was above the 4.29 percent forecast in a Reuters poll.

In the first half of March, consumer prices rose 0.35 percent MXCPIF=ECI while the core price index MXCPIH=ECI climbed 0.31 percent.




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