Bloomberg News

Mexico Inflation Rate Down as Prices Rise Less Than Forecast

October 24, 2012

Mexico’s consumer prices rose less than economists expected in early October, and annual inflation slowed after accelerating in each of the past five months.

Prices climbed 0.45 percent in the first two weeks of October, the national statistics agency said on its website today, compared with the 0.48 percent median estimate of 19 analysts surveyed by Bloomberg. Annual inflation slowed to 4.64 percent from a 30-month high of 4.77 percent at the end of September.

Annual inflation has remained above the central bank’s 2 percent to 4 percent target range since June as a bird flu outbreak in Mexico and a drought in the U.S. drove up egg, poultry and grain prices. Economists expect inflation of 4.1 percent by year-end, according to a Citigroup Inc. survey published Oct. 22. As recently as Aug. 15, policy makers said they expected inflation to slow below 4 percent this year.

“We’re seeing shocks that we expect will be temporary,” central bank Governor Agustin Carstens said Oct. 19. “It would be difficult to resolve this through monetary policy alone.”

The central bank board, led by Carstens, kept the key rate at 4.5 percent on Sept. 7, the lowest level among major rate-setting banks in Latin America after Peru.

Borrowing Costs

The only Group of 20 nation to leave borrowing costs unchanged and not step up asset purchases in the past three years will keep rates on hold until March 2014, according to the survey by Citigroup Inc.’s Banamex unit this month.

Economists also bumped up their 2013 inflation forecast to 3.7 percent from 3.66 percent and raised their 2013 growth estimate to 3.5 percent from 3.3 percent.

With analysts forecasting inflation above 4 percent through 2012, “the worsened scenario is worrisome,” central bank Deputy Governor Manuel Sanchez wrote in a Sept. 28 report.

The peso has advanced 7.6 percent this year against the dollar, the most among the greenback’s 16 most-traded counterparts. The peso rose 0.2 percent to 12.9515 per U.S. dollar at 9:03 a.m. in Mexico City.

To contact the reporters on this story: Randall Woods in Santiago at rwoods13@bloomberg.net; Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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