(Updates with analyst comment in fourth paragraph.)
Dec. 8 (Bloomberg) -- Mexico’s consumer prices jumped by the most in almost two years in November, limiting the central bank’s space to lower borrowing costs as Europe’s debt crisis deepens.
Consumer prices rose 1.08 percent in November, outpacing expectations for a 1.06 percent increase according to the median estimate of 19 analysts in a Bloomberg survey. It was the biggest jump since prices rose 1.09 percent in January 2010. Prices rose 3.48 percent from a year ago, the national statistics agency said on its website.
Inflation accelerated last month even as a government- sponsored drive to boost spending led retail chains to offer discounts on consumer goods across the country. The price surge came as the peso continued to weaken against the U.S. dollar and as the government removed electricity subsidies to reflect lower energy use during the cooler, end-of-year months.
“It’s a seasonal increase,” said Rafael de la Fuente, an economist at UBS AG in Stamford, Connecticut. “There’s not enough evidence in these numbers as of yet to suggest you’re seeing a higher pass through on account of the exchange rate.”
Central Bank Governor Agustin Carstens said Oct. 25 that a higher-than-expected jump in consumer prices in the first half of October will probably ease in the coming months. While the bank says it sees no evidence that a region-beating slump in the peso is fueling a rise in inflation expectations, policy makers last month tapped Mexico’s $140 billion currency reserves to protect the peso from Europe’s deepening debt crisis.
The peso is the second-worst performer this year among 16 major currencies tracked by Bloomberg after South Africa’s rand. It has rallied 3.6 percent since Mexico’s currency commission announced Nov. 29 that the central bank will auction $400 million of its reserves daily to stem exchange-rate volatility.
The currency fell 0.2 percent to 13.5379 per dollar at 8:12 a.m. Mexico City time. The yield on Mexico’s benchmark peso- denominated bond due in 2024 rose five basis points, or 0.05 percentage point, to 6.56 percent.
Mexicans paid 22 percent more for electricity last month as government subsidies were withdrawn. Food, beverage and tobacco prices rose 0.34 percent while fruit and vegetable prices jumped 1.61 percent, the report showed.
Core inflation, excluding items such as energy and food, rose 0.32 percent, the agency said.
Not all economists see the peso’s 13 percent slide in the past six months in such a benign light, and inflation expectations have started to rise in recent analyst surveys. Mario Correa, chief economist at Grupo Financiero Scotiabank SA in Mexico City, said that the currency’s depreciation could begin to cause consumer prices to rise.
“We won’t know if this is happening for another two or three months,” Correa said in a Nov. 30 phone interview.
The consumer price index will end the year at 3.47 percent, according to a Dec. 5 bi-weekly survey by Citigroup Inc.’s Banamex unit. That compares with 3.32 percent in the previous survey. A Dec. 1 central bank survey showed economists increased their forecast for 2011 inflation to 3.36 percent after having reduced their estimates for eight consecutive months.
Finance Minister Jose Antonio Meade said Dec. 6 that the peso’s slide is less of a concern than it was following the 2008 collapse of Lehman Brothers Holdings Inc.
“There has been less volatility in the exchange rate than in 2008 and it is correcting itself,” Meade told a group of businessmen in Mexico City. “Inflation should continue to be well-behaved” in 2012.
Policy makers led by Carstens left the overnight rate at 4.50 percent for a 23rd straight meeting Dec. 2, reiterating that the central bank is open to cutting rates if global monetary easing continues.
“Risks for a quickening in inflation come from an adverse dynamic of the exchange rate and the possibility of a rebound in some farm prices,” the bank said.
Faster inflation last month did not alter JPMorgan Chase & Co.’s call for the central bank to begin cutting its reference rate in the first quarter of 2012, Mexico City-based economist Gabriel Casillas wrote in a report after today’s report.
Growth in Latin America’s second-biggest economy will slow to 3.3 percent next year, according to the 2012 budget, down from an expected 4 percent this year and 5.4 percent in 2010.
The central bank next meets Jan. 20 to decide on rates.
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