Mexico Consumer Prices Rose Less-Than-Expected 0.15% in First Half of July

Mexico’s consumer prices rose 0.15 percent in the first half of July, signaling an end the country’s longest period of deflation in at least three decades.

Inflation was led by higher costs for perishable foods and travel packages, the central bank said today on its website. Economists forecast prices would rise 0.25 percent, according to the median estimate of 12 analysts surveyed by Bloomberg.

The report shows there’s no threat to the bank’s inflation projections and policy makers have room to keep the benchmark lending rate at 4.5 percent through at least year-end, said Sergio Martin, chief economist for Mexico at HSBC Holding Plc.

“We’re seeing moderation in economic growth, and inflation is totally under control,” Martin said, speaking in a telephone interview from Mexico City.

The core measure of consumer prices, which excludes some food and energy items, rose 0.13 percent in the first half of July. Economists expected a 0.19 percent increase, according to the median of 12 forecasts compiled by Bloomberg.

Mexico’s central bank last week kept its benchmark interest rate unchanged for an 11th straight meeting, matching the bank’s longest pause, after consumer prices declined for the past three months.

Benchmark Rate

Banco de Mexico will keep the overnight rate unchanged until April, when it will raise the rate 0.25 percentage point, according to a survey of analysts by Citigroup Inc.’s Banamex published July 20. Economists predicted borrowing costs could rise in March 2011 in Banamex’s previous survey.

Three straight months of declining prices through June, the longest such streak since at least February 1973, pushed the annual inflation rate down to 3.69 percent in June.

Mexico’s peso gained 0.9 percent to 12.7554 per U.S. dollar at 12:13 p.m. New York time. The peso has risen 2.6 percent this year, the second-best performance against the U.S. dollar among 16 major currencies tracked by Bloomberg.

Mexico’s economy grew 7.2 percent in April from a year earlier, as measured by the global economic indicator. Gross domestic product grew 4.3 percent in the first three months of the year from the same period a year earlier.

The International Monetary Fund forecasts Mexico’s GDP will expand 4.5 percent in 2010. Latin America’s second-biggest economy is recovering from a 6.5 percent contraction last year, the biggest slump since 1932.

Mexican retail sales rose 5 percent in May from a year earlier, the most since April 2008, the statistics agency said yesterday. Economists had predicted a rise of 3.4 percent, according to the median estimate of 10 analysts surveyed by Bloomberg.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at Jlevin20@bloomberg.net

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