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UPDATE 2-Mexico inflation cools to 7-month low in early May
May 22, 2014 / 1:32 PM / 4 years ago

UPDATE 2-Mexico inflation cools to 7-month low in early May

(Adds unemployment data)

MEXICO CITY, May 22 (Reuters) - Mexican annual inflation eased in early May to a seven month low as summer electricity subsidies kicked in and some fresh food prices fell, backing bets that policymakers will leave interest rates on hold this year at a record low to support weak growth.

Inflation for the 12 months through the first half of May cooled to 3.44 percent, just below the 3.47 percent rate expected in a Reuters poll and down from the 3.53 percent rate in the first half of April.

Inflation for the full month of April notched 3.50 percent.

The annual pace of consumer price gains has been falling back after spiking in January above the central bank’s 4 percent limit due mostly to new taxes on soft drinks and fast food.

Mexico’s central bank held its main interest rate steady last month at 3.5 percent to help the economy recover from a slowdown last year, as easing inflation gave policymakers room to leave borrowing costs low.

Growth sank to a 4-year low of 1.1 percent in 2013 and analysts see the economy growing around 3 percent this year.

Economists have been cutting back expectations for expansion this year after a weak first quarter when consumer demand was sluggish.

On Wednesday, Mexico’s central bank cut its growth forecast for the year to between 2.3 and 3.3 percent, down from a prior estimate of 3 to 4 percent, but policymakers said a recovery is gaining steam.

Consumer prices fell 0.37 percent in early May, due to summer electricity subsidies and a drop in some fresh food prices.

The figure compares to a 0.35 percent drop forecast in a Reuters poll and the 0.19 percent dip notched in the first half of April.

Core consumer prices, which exclude some volatile food and energy prices, rose 0.06 percent, below estimates for a 0.11 percent rise and the 0.26 rate percent notched in early April.

A separate report on Thursday showed that the jobless rate when adjusted for seasonal swings eased to 4.89 percent in April compared to March, when it was at an over one year high. .

In unadjusted terms, the jobless rate stood at 4.84 percent. (Reporting by Alexandra Alper; Editing by Sofina Mirza-Reid)

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