Mexico Inflation Falls to Lowest Rate Since 1970 Brendan Case and Rafael Gayol - Bloomberg News
go to original June 10, 2015

Mexico's inflation rate fell to the lowest since at least 1970 in May, dropping below the target rate for only the second time ever, as greater competition in the telecoms sector brought tariffs down and oil prices declined.

Annual inflation eased to 2.88% from 3.06%, the national statistics institute said Tuesday, compared with the 2.91% median forecast of 23 analysts surveyed by Bloomberg. In the month, prices slid 0.5%.

May's report caps 13 years of subdued price growth after the central bank introduced an inflation target of 3%, slashing a rate that had averaged 39% over the previous quarter of a century. The latest dip in the rate follows the removal of barriers to competition in the telecommunications industry, falling oil prices and sluggish economic growth.

"The lowest inflation historically is the result of the effort by the central bank to fight inflation," said Carlos Capistran, an economist at Bank of America. "It shows that the inflation targeting regime is working. But several other components have helped."

The peso strengthened 0.3% to 15.5695 per U.S. dollar at 11:35 a.m. in Mexico City. The currency declined to the lowest since a 1993 redenomination June 5.

Core prices, which exclude energy and farm costs, increased 0.12% in May from a month earlier, in line with analysts' median forecast.

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