Bloomberg News

Mexico CPI Unexpectedly Fall as Farm Prices Slide (Correct)

June 24, 2013

(Corrects average inflation estimate after Bank of America corrected its original forecast.)

Mexico’s consumer prices unexpectedly fell in the first half of June, adding to pressure on policy makers to keep interest rates on hold even as inflation remains above the target range.

Prices slid 0.05 percent in the first two weeks of the month, the national statistics agency said today on its website, compared with the median estimate of 13 economists surveyed by Bloomberg for an increase of 0.08 percent. Annual inflation slowed to 4.24 percent from 4.63 percent in May, above the central bank’s 2 percent to 4 percent target range after fruits and vegetables dropped 5.06 percent. Core prices, which exclude energy and farm costs, rose 0.07 percent in early June, compared with an increase of 0.09 percent forecast in a Bloomberg survey.

Policy makers said downside risks to Latin America’s second-largest economy have “intensified” and inflation will slow toward target, according to the minutes of the central bank’s most recent rate decision. Even so, the peso’s plunge in the past month due to speculation the U.S. Federal Reserve will scale back its asset buying program has closed the door to a second rate cut in Mexico this year, according to economists.

Inflation will slow slightly in June and more quickly starting in July after picking up “significantly” in recent months, policy makers said in the minutes to their June 7 decision, when they agreed unanimously to leave the key rate at a record-low 4 percent.

To contact the reporters on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net; Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net


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