September 9, 2019 / 2:16 PM / 14 days ago

Mexican annual inflation cools to almost three-year-low in August

MEXICO CITY (Reuters) - Mexican consumer price inflation slowed more than expected in August to near a three-year low, data from the national statistics agency showed on Monday, giving the central bank more latitude to lower borrowing costs further.

Inflation eased to 3.16% in August, undershooting the 3.20% consensus forecast of economists polled by Reuters poll and taking the headline rate to its lowest since October 2016, the statistics agency’s data showed.

In July, inflation stood at 3.78%.

A slowdown in inflation has coincided with a sluggish performance by the economy, and Mexico narrowly avoided slipping into recession during the first half of this year.

The economy was likely to stay weak for the remainder of 2019, which would contain price pressures, economists at Citibanamex said in a research note.

“We expect inflation to continue around its current level for the rest of the year, closing 2019 at 3.2% and creating enough room for the Bank of Mexico to lower its main lending rate again at its September meeting,” they said.

Last month the central bank cut its benchmark lending rate for the first time since June 2014, pointing to slowing inflation and increasing slack in the economy, and fuelling expectations that further rate cuts could be coming.

The bank, which holds its next monetary policy meeting on Sept. 26, targets an inflation rate of 3%, with a one percentage point tolerance above or below that figure.

Compared with the previous month, consumer prices fell by 0.02% in August. The Reuters poll had forecast an increase of 0.02%. The core price index, which strips out some volatile food and energy prices, rose 0.20% during the month.

Reporting by Dave Graham; Editing by Steve Orlofsky

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