Mexico Prices Rise in Line With Estimates as Inflation Falls

Mexican consumer prices rose in line with analyst expectations in the first half of November as the annual inflation rate dropped to the lowest in three months.

Prices increased 0.74 percent from two weeks earlier, the national statistics institute said on its website today, compared with the 0.75 percent median forecast of 24 economists surveyed by Bloomberg. The annual inflation rate fell to 4.16 percent, the lowest since August. Banco de Mexico targets inflation of 3 percent, plus or minus one percentage point.

The central bank, led by Governor Agustin Carstens, kept borrowing costs steady at a record-low 3 percent last month, saying the economy was rebounding without pressuring inflation. Policy makers unexpectedly cut the benchmark rate by half a point in June to bolster growth that has missed economists’ forecasts in eight of the past 10 quarters.

“The number was very much in line with market expectations,” Delia Paredes, an analyst with Grupo Financiero Banorte SAB, said in a telephone interview from Mexico City. “The core number was also no surprise which tells you there aren’t any inflationary pressures we need to worry about.”

Core prices, which exclude energy and farm costs, increased 0.13 percent during the first half of November, in line with analyst estimates. Non-core prices advanced 2.66 percent, as electricity costs jumped 24.8 percent with the end of summer subsidies.

Slack Remains

The peso was little changed at 13.6196 per U.S. dollar at 8:45 a.m. in Mexico City.

Banco de Mexico cut its growth forecast range last week, saying indicators of domestic demand such as consumer confidence remain weak even as exports pick up. The bank said the economy will expand 2 percent to 2.5 percent this year, compared with its previous forecast of 2 percent to 2.8 percent.

While the economy continued to recover in the third quarter, it did so at a more moderate rate than in the previous quarter, the central bank said in its quarterly inflation report Nov. 19. Plenty of slack remains and aggregate demand is not expected to generate price pressures in the coming quarters, according to the report.

Gross domestic product rose 2.2 percent in the third quarter from a year earlier, compared with the 2.3 percent median estimate of analysts surveyed by Bloomberg. The Finance Ministry cut its growth forecast Nov. 21, saying the economy would expand 2.1 percent to 2.6 percent this year compared with a previous forecast of 2.7 percent.

The central bank said it expects annual inflation to slow to near 4 percent by year end from a nine-month high of 4.3 percent in October and to near its 3 percent target by the middle of 2015.

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