Banxico: Mexico Faces Heightened Inflation Risk Michael O'Boyle - Reuters
go to original October 2, 2014

Mexico's inflation outlook has worsened after a spike in fresh food prices and the chance that a minimum wage hike may be approved by authorities, says Mexican central bank Deputy Governor Manuel Sanchez.

Sanchez said in a speech in New York that inflation would likely remain above 4 percent during this year and that a wage hike could end up spurring broader price pressures, according to an emailed copy of his speech.

"Significant minimum wage hikes may contaminate the process of price formation. These adjustments could trigger a chain reaction on inflation expectations," and make it harder to reach the central bank's 3 percent target, Sanchez said.

Data this week showed Mexican annual inflation remained above the central bank's tolerance ceiling in early September at 4.21 percent. Policymakers have said they expect inflation to cool back near 3 percent in the first half of 2015.

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