Inflation Seen Spiking Due to Mexico Fuel Price Hike Alexandra Alper - Reuters
go to original December 29, 2016

People wait in line to fill containers with gasoline at a gas station in Oaxaca, Mexico (Reuters/Jorge Luis Plata)

Mexican bank Banorte hiked its 2017 inflation outlook to 4.7 percent from 4.3 percent after the finance ministry said on Tuesday that new January price ceilings would be 14.2 percent to 20.1 percent above December's highest recorded prices.

Brokerage Finamex, which will soon revise upward its 4.5 percent inflation forecast for 2017, said the fuel price hikes would increase the consumer price index by 0.8 percent in the first half of January compared with the last half of December.

Mexico's central bank this month hiked interest rates for a fifth time this year to curb inflation that is already running above the central bank's 3 percent target. Inflation has been fanned by a slump in the peso currency following Donald Trump's U.S. presidential victory.

"The challenge for monetary policy in 2017 is enormous," Finamex said in a client note, forecasting that central bank rate hikes will continue into next year.

Brokerage Vector said it would raise its inflation forecast for January, but it did not say by how much.

Invitations to a Mexico City protest and a gasoline boycott circulated on social networks, while Concamin, a Mexican industry association, expressed concern that the move would create added headwinds for local businesses.

Finance Minister Jose Antonio Meade defended the fuel price hike, arguing that keeping gasoline costs artificially low following an increase in international oil prices was too expensive for public finances.

"We couldn't keep doing it," he said on television.

Oil prices have surged about 50 percent this year after plunging to multi-year lows in January.

Read the rest at Reuters

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