Mexico will reduce the weighting of energy and farm items in its inflation basket, according to a preliminary report by the national statistics institute, a move that could lower its consumer price index.
Core prices, which exclude agriculture and energy costs, would account for 78.5 percent of the total basket in April, up from 76.7 percent, based on the report published on the agency’s website today.
The new weightings would help bring down the inflation rate, said Alonso Cervera, an economist at Credit Suisse Group AG because it puts more weight on prices that are increasing at a slower pace. Mexican core consumer prices increased 2.88 percent in January from the year earlier, below the central bank’s target of 3 percent and less than the 3.25 percent overall inflation rate. Core inflation has trailed headline inflation for most of the past four years.
“In principle, people should be bringing down their forecast for headline inflation under the new weightings,” Cervera said in a telephone interview from Mexico City. “We know that the driver for a rate cut will be that inflation stays low, stable and approaches 3 percent.”
Mexico’s adjustment in the inflation calculation is being made based on a periodic survey of household spending.