Inflation in Mexico Jumps by the Most in 18 Years Nacha Cattan - Bloomberg News
go to original January 25, 2017

Geoffrey Dennis, head of global emerging market strategy at UBS, explains how the firm is positioned for the policies of President Donald Trump and discusses how a battle over trade with the United States could negatively impact the Mexican peso and economy. He speaks on "Bloomberg Surveillance." (Bloomberg)

Mexico's inflation rate jumped by the most in 18 years and more than economists expected as gasoline prices surged and the peso slumped, pressuring policy makers to raise the benchmark lending rate further.

Consumer prices increased 4.78 percent in the first half of January from the year earlier, well above the central bank's 3 percent target and compared with 3.24 percent in late December, the national statistics institute said on its website Tuesday. Prices climbed 1.51 percent from two weeks earlier, more than the 1.27 percent median forecast of 18 economists surveyed by Bloomberg.

Mexico is facing soaring inflation, even as economic growth remains weak amid uncertainty over President Donald Trump's threats to renegotiate free trade and as local fuel costs jump. Economists now see the central bank's overnight rate rising 1.25 percentage points to 7 percent this year as inflation ends the year far above the target, according to a Citibanamex survey.



Inflation's fall from grace is all the more stark because it remained below the target for much of the past two years and hit a record low in late 2015. The currency's 20 percent depreciation since the start of last year is now weighing on prices, as is a surge of up to 20 percent in gasoline prices as Mexico removes subsidies. Early January's annual inflation is the fastest since 2012.

Still, central bank Governor Agustin Carstens says the impact from fuel costs on inflation will be temporary and that long-term expectations for prices are well anchored.

Read the rest at Bloomberg News

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