Mexican Consumer Prices Rose More Than Expected Early September

Mexican consumer prices (MXCPCHNG) rose more than economists expected in the first half of September as gasoline and farm costs climbed.

Prices rose 0.34 percent in the first two weeks of the month, the national statistics agency said today on its website, compared with the median forecast for an increase of 0.23 percent from 17 economists in a Bloomberg survey. Annual inflation was 3.46 percent, unchanged from August and remaining below the 4 percent upper limit of the central bank’s target range. Core prices, which exclude energy and farm costs, increased 0.3 percent, more than the 0.22 percent median projection.

Mexican policy makers surprised analysts by cutting the benchmark interest rate for a second time this year on Sept. 6, saying the economy suffered a significant and unexpected slowdown in the second quarter. In a 3-2 decision, the Banco de Mexico board reduced the overnight lending rate by 25 basis points to a record 3.75 percent after annual inflation slowed in each of the previous four months amid easing agricultural prices.

The peso weakened 0.4 percent to 12.8500 per dollar at 8:08 a.m. in Mexico City. The currency rallied last week after the U.S. Federal Reserve refrained from paring its $85 billion monthly stimulus program, which has fueled demand for Mexican securities.

Agriculture and livestock prices increased 0.54 percent in the first half of September, while energy and other prices that are set by the government rose 0.4 percent.

Inflation Outlook

The majority of policy makers at the Sept. 6 central bank meeting said that “in coming months, it’s expected that inflation’s path will be lower than previously anticipated due to estimates that the large degree of slack in the economy will continue in the second half of this year and next year,” according to minutes published on Sept. 20.

Inflation will end the year at 3.5 percent, according to the median estimate in a bi-weekly survey by Citigroup Inc.’s Banamex unit published on Sept. 20, down from a 3.52 percent estimate in the previous survey.

Banxico surprised analysts on March 9 by cutting its key borrowing rate by 0.5 percentage point, the first adjustment since July 2009.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net

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

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