Mexican inflation may not slow within policy makers’ target range this quarter as forecast by central bank Governor Agustin Carstens, the Finance Ministry’s top economist said.
“It could happen, but it looks complicated,” Miguel Messmacher said in an interview in his Mexico City office. “It’s very difficult to predict what exactly will happen with the weather.”
Carstens said in a July 4 interview that consumer price increases will “very likely” slow to an annual rate within the central bank’s 2 percent to 4 percent target range. Five days after the interview the statistics institute reported annual inflation for June at 4.34 percent, the highest rate since December 2010 and more than economists expected.
Rains that ended a drought in parts of Mexico have not reached all crop-producing regions, and pressures on agricultural prices have lingered, Messmacher said. An outbreak of bird flu in western Mexico could also cause egg prices to keep rising, he said. Carstens said the flu may cause a “blip” in costs that won’t last.
Mexico’s Economy Ministry said July 4 it may import eggs after the flu caused authorities to destroy hundreds of thousands of chickens, triggering reports of rising egg prices.
Economists raised their year-end inflation forecast to 3.81 percent from 3.65 percent in a monthly survey by the central bank published July 2.
Inflation may reach the target range this quarter if rainfall spreads and Mexico imports eggs, Messmacher said. The consumer price index will decline in the fourth quarter, he said.
“In the next quarter we should be seeing a strong convergence toward 3.5 percent,” he said. “It’s a sure thing.”
The peso depreciated 1 percent at 12:36 p.m. in Mexico City to 13.4368 per dollar from 13.3063 yesterday. Yields on inflation-linked bonds, known as Udibonos, due in December 2013, fell four basis points, or 0.04 percentage point to 0.07 percent, according to data compiled by Bloomberg.