Prices slid 0.06 percent from May, the national statistics agency said today on its website, compared with median forecast of 22 economists surveyed by Bloomberg for a decline of 0.02 percent. Farm prices tumbled 3 percent. Annual inflation slowed to 4.09 percent from 4.63 percent in May, heading toward the central bank’s 2 percent to 4 percent target range. Core prices, which exclude energy and farm costs, rose 0.13 percent in the month, compared with the median forecast of 0.17 percent.
Threats to growth in Latin America’s second-largest economy have “intensified” and inflation will slow toward the 3 percent target, central bank board members said in minutes of their June 7 meeting. They left the key rate unchanged at a record-low 4 percent after cutting it in March for the first time since 2009. Economists expect the next rate move to be a quarter-point increase in November 2014, according to the median estimate in a July 5 survey by Citigroup Inc.’s Banamex unit.
A plunge in the peso in May on speculation the U.S. Federal Reserve will scale back asset purchases eliminated the possibility of a second rate cut this year and strengthened the odds for an increase. In a June 5 poll, economists had forecast a half-point cut in September.
The peso rose 0.4 percent to 12.8283 per dollar at 8:02 a.m. in Mexico City and has retreated 6.5 percent in the past two months from an almost two-year high in May. The U.S. Fed said in May that it may pare back monetary stimulus, damping demand for emerging market assets.
The central bank will leave rates unchanged in its next decision on July 12, according to the median estimate of all 23 economists surveyed by Bloomberg.
The July 5 survey also showed that economists cut their median forecast for year-end inflation to 3.79 percent from 3.9 percent in the prior poll and left their annual growth projection at 2.7 percent, down from 3 percent on June 5 and less than the government’s 3.1 percent forecast. The government cut its own prediction in May from 3.5 percent after expansion slowed more than expected to 0.8 percent in the first quarter, the least since the end of the 2009 recession.
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