March 24 (Bloomberg) -- Mexico’s annual inflation in early March slowed to within the central bank’s target range for the first time since December as consumer prices increased less than forecast by analysts.
Annual inflation slowed to 3.89 percent, below the 4 percent upper limit of the target range, from 4.23 percent in February. Prices climbed 0.17 percent in the first half of March, the national statistics agency said, less than the 0.19 percent median forecast of 20 analysts surveyed by Bloomberg. Core prices, which exclude energy and farm costs, increased 0.11 percent, less than the 0.16 percent median forecast, as services costs rose the least since late December.
Annual inflation has slowed from an eight-month high in January, when new taxes on junk food and soft drinks took effect. Banco de Mexico said March 21 that faster inflation is temporary and that the economy, which has failed to show clear signs of recovery, won’t pressure prices. The central bank forecasts inflation will slow to almost the 3 percent target next year.
“Today’s report confirms why the central bank is confident on inflation dynamics,” Gabriel Lozano, the chief Mexico economist at JPMorgan Chase & Co., said in an e-mailed response to questions. “Even more, the most important increments this time around were observed in non-core components, while core prices surprised to the downside.”
The peso strengthened 0.1 percent to 13.2132 per U.S. dollar at 8:52 a.m. in Mexico City, paring this year’s loss to 1.3 percent. The yield on inflation-linked bonds due in 2017 rose one basis point, or 0.01 percentage point, to 1.53 percent.
An 8 percent levy on junk food and 1 peso-per-liter tax on soda pop took effect at the start of the year, along with higher sales taxes in regions bordering the U.S.
Services prices rose 0.09 percent in early March, the least since a 0.03 percent decline in the second half of December. Tomato prices fell 7.5 percent and chicken prices declined 1.1 percent.
Mexican consumer confidence dropped to the lowest level in almost four years in January and retail sales fell 0.3 percent from a year earlier after the nation’s tax increase took effect.
“Even when public spending has shown more dynamism, exports, as well as consumption and private investment, still don’t show obvious signs of acceleration,” the central bank said in a statement accompanying its March 21 decision to leave the overnight rate at a record-low 3.5 percent.
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