Mexican core inflation slows more than expected to 20-month low
Reuters
Published Sep 07, 2023 09:43AM ET
Updated Sep 07, 2023 11:50AM ET
By Natalia Siniawski
(Reuters) -Annual core inflation in Mexico slowed to a 20-month low in August, data from statistics agency INEGI showed on Thursday, below market forecasts as the country's central bank holds interest rates to tamp down on price increases.
The rate - considered a better gauge of price trends than headline inflation because it excludes some highly volatile items - came in at 6.08%, its lowest level since December 2021 and below the 6.12% estimated by a Reuters poll of economists.
That drop was off the back of lower core goods inflation, Capital Economics analyst Jason Tuvey said, while services inflation - which central bank board members have described as "sticky" - remained above 5% year over year.
Annual core inflation in the second half of the month was "good news," said central bank board member Jonathan Heath on social media network X. However, "there is still a long way to go," he added.
Headline inflation edged downward to 4.64% in the month, in line with market expectations and its lowest since March 2021.
That was driven by softer core price pressures, Capital's Tuvey said, but with inflation in the services sector still proving stubborn, the central bank is still unlikely to kick off an interest-rate easing cycle soon.
The Bank of Mexico voted last month to keep its benchmark interest rate steady at a historic high of 11.25%, with board members suggesting it will stay at that level for an extended period to bring inflation to its target of 3% plus or minus one percentage point.
Consumer prices rose 0.55% in August from July, according to non-seasonally adjusted figures, above the expected 0.52%.
The closely watched core price index rose 0.27% during the month.
"Overall, the disinflation story in Mexico is continuing, despite a resilient labor market and solid wage growth," said Pantheon Macroeconomics' Chief Latin America Economist Andres Abadia.
Lower input prices, weakening growth momentum in key economic sectors and the lagged effect of elevated real interest rates are helping to push down inflation, Abadia added.
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Written By: Reuters
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