Inflation in Mexico Gathered Speed in November Anthony Harrup - Nasdaq
go to original December 9, 2016

Customers reach for televisions at a Wal-Mart de Mexico store in Monterrey, Mexico (Daniel Becerril/Reuters)

Mexico's inflation accelerated in November to its fastest pace in two years, affected by higher food prices and the impact of a weaker currency on the cost of imported goods.

The consumer price index rose 0.78% last month, pushing the annual inflation rate up to 3.31% from 3.06% at the end of October, the National Statistics Institute said Thursday.

The November increases were below the median estimates of 0.82% and 0.3%, respectively in a Wall Street Journal survey of economists.

Electricity rates contributed the most to November's inflation as summertime subsidies ended in northern cities, although overall energy costs have risen just 1.77% in the past year. Food prices, however, were up more than 5% from November 2015, as were health costs.

The depreciation of the Mexican peso against the U.S. dollar, which raises the price of imported goods, has also affected inflation. Core goods prices, those most affected by the currency, were up an annual 3.91% in November.

The inflation risk from the weaker peso prompted the Bank of Mexico to raise interest rates four times this year, bringing the overnight lending rate target to 5.25% from 3.25% at the end of 2015.

"The sharp peso depreciation during the last 12 months and very accommodative domestic financial conditions added upside risk to the inflation outlook in spite of the loss of growth momentum," Goldman Sachs Latin America economist Alberto Ramos said in a note. "This backdrop fully justifies the central bank decision to continue to push rates higher."

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Related: Mexico’s Consumer Confidence Drops to Two-Year Low After Trump Election (PanAm Post)

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