Consumer Prices in Mexico Rise Most Since March Amid Rate Reduction Eric Martin - Bloomberg
go to original November 8, 2013

Mexican consumer prices rose in October by the most in seven months as energy costs increased and the central bank cut interest rates.

Prices climbed 0.48 percent from a month earlier, compared with the 0.46 percent median forecast of 20 economists in a Bloomberg survey. Annual inflation slowed to 3.36 percent, the least since January, from 3.39 percent in September.

The central bank this week raised its forecast for inflation next year to 3.5 percent, a week after Governor Agustin Carstens said policy makers shouldn’t reduce interest rates from the current record low because tax increases will add to pressure on prices in the short term. The central bank’s board cut the benchmark interest rate a quarter percentage point to 3.5 percent on Oct. 25 and signaled that the move will be the last reduction in borrowing costs.

“Taking into consideration the impact of the fiscal reform, a rate below 3.5 percent at this time, is not necessary, adequate for the convergence” of inflation to the central bank’s 3 percent target, Carstens said in an Oct. 30 interview.

Congress last week approved an 8 percent levy on junk food, a 1 peso-per-liter duty on sugary drinks, and raised sales taxes at the border to 16 percent from 11 percent.

Read the rest at Bloomberg

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