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UPDATE 2-Mexico inflation ticks up, boosting rate hike expectations
December 7, 2017 / 2:40 PM / 5 days ago

UPDATE 2-Mexico inflation ticks up, boosting rate hike expectations

 (Updates with reaction from economists, details)
    MEXICO CITY, Dec 7 (Reuters) - Mexican inflation accelerated
for a second straight month in November, data showed on
Thursday, raising the likelihood the central bank will raise
interest rates this month to contain price pressures.
    Annual inflation ticked up to 6.63 percent from 6.37 percent
in October, data from the national statistics agency showed. The
median forecast of a Reuters poll of analysts was 6.60 percent.
    The latest data took inflation to its steepest rate since
August, when it reached the highest level in 16 years.
    Mexico's central bank in June raised the benchmark interest
rate to 7.00 percent, the highest level since early 2009, and
analysts said the latest inflation data made a fresh rate hike
more likely.
    The central bank publishes its latest rate decision on Dec.
14. It will be the first presided over by new governor Alejandro
Diaz de Leon following the departure of Agustin Carstens to the
Bank for International Settlements at the end of November.
    "We now expect policymakers to raise interest rates by 25
basis points (to 7.25 percent) at Alejandro Diaz de Leon's first
meeting as Central Bank Governor next week," Capital Economics
said in a note to clients following the data.
    In his first few days on the job, Diaz de Leon said Mexico's
inflation outlook had deteriorated in recent months, and warned
inflation's predicted downward path in 2018 could be affected by
more possible shocks in the future.             
    Analysts are concerned a further slump in Mexico's peso
could boost consumer prices due to higher import costs.
    The peso has been hurt by concerns that U.S. President
Donald Trump could abandon the North American Free Trade
Agreement (NAFTA), which underpins Mexico's export economy.
    Banco BASE economist Gabriela Siller said the recent
depreciation in the peso and a predicted U.S. Federal Reserve 
interest rate hike on Dec. 13, meant there was a 70 percent
chance Mexico would raise rates.
    Goldman Sachs economist Alberto Ramos said in a note a
quarter point rate increase in Mexico was the most likely
scenario. 
    Compared with the prior month, consumer prices             
rose 1.03 percent in November, boosted by higher electricity,
gas and transport costs, figures from the agency showed. The
monthly increase in the index was the highest since January.
     The core index, which strips out some volatile food and
energy prices, rose 0.34 percent during the month             .

 (Reporting by Dave Graham and Miguel Angel Gutierrez; Editing
by Susan Thomas)
  

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