Mexico Prices Rise Less Than Forecast as Peso Impact LimitedBrendan Case
Mexico consumer prices rose less than analysts expected in the first half of March, keeping annual inflation at an almost nine-year low, as meat costs declined and pressure from a weaker currency remained limited.
Prices climbed 0.18 percent from a month earlier, the national statistics institute said on its website Tuesday, compared with the 0.25 percent median forecast of 21 economists surveyed by Bloomberg. Annual inflation was 2.97 percent, unchanged from the second half of February and the lowest since May 2006.
Price pressure from a weaker peso remained limited in the first half of the month even after the currency hit a record low March 10, said Jose Velasco, an economist at Casa de Bolsa Ve Por Mas, who had the most accurate inflation forecast for the period. Price declines for pork, chicken and beef also helped restrain inflation.
“There was a lower-than-expected impact from the weaker peso on non-food merchandise and limited price pressure from what is a very moderate economic recovery,” Velasco said by phone from Mexico City. “In fresh food, the decline in meat prices offset the increase in egg prices.”
The peso weakened 0.1 percent to 14.9438 per U.S. dollar at 8:55 a.m. in Mexico City.
Core prices, which exclude energy and farm costs, increased 0.15 percent in the first half of March from a month earlier, less than the 0.20 percent median forecast by analysts. Core merchandise prices excluding processed food, drinks and tobacco climbed 0.20 percent.
Non-core prices advanced 0.28 percent, including a 0.36 percent decline in meat costs.
Banco de Mexico, led by Governor Agustin Carstens, said last month that the annual inflation rate would end 2015 slightly below its 3 percent target.
The central bank kept its key interest rate unchanged at a record low of 3 percent on Jan. 29, saying the economy faces significant downside risks. It cut its 2015 growth forecast last month to 2.5 percent to 3.5 percent from a previous estimate of 3 percent to 4 percent.
The bank had lowered its benchmark rate half a point in June in an effort to bolster growth that has missed economists’ forecasts in eight of the past 11 quarters. The next monetary policy meeting is scheduled for Thursday.
Policy makers said they can’t rule out that inflation may rise if the peso remains at current levels for a prolonged period or weakens further.
Inflation will end the year at 3.3 percent, according to the median forecast of economists surveyed by Bloomberg. The economy will expand 3 percent this year, up from 2.1 percent last year, analysts forecast.