MEXICO CITY — Mexican annual inflation slowed more than expected in the first half of October but remained far above the central bank’s target rate, data from national statistics agency INEGI showed on Monday.
Headline inflation in Latin America’s second-largest economy inched down to 8.53% from 8.64% in the second half of September, also undershooting the consensus forecast of a Reuters poll for a rate of 8.63%.
“With the measures we’re taking we are seeing a slowdown in inflation,” President Andres Manuel Lopez Obrador told a news conference, pointing to a pact with retailers to contain prices of key food staples. “A little, but already it’s not going up.”
Compared with the previous two-week period, Mexican consumer prices rose by 0.44% in early October, the data showed. The Reuters poll had forecast an increase of 0.53%.
Mexico’s central bank has been raising interest rates since June 2021 in a bid to tamp down inflation, which has blown past the bank’s target of 3% plus or minus 1 percentage point.
The benchmark rate stands at a record 9.25%, and minutes from the Bank of Mexico’s September monetary policy meeting showed the board eyeing future hikes amid inflation risks.
Jason Tuvey, Capital Economics’ senior emerging markets economist, expects a 75 basis-point hike in November due to the U.S. Federal Reserve remaining in a hawkish mood.
“But these latest figures suggest that the end of the tightening cycle is not too far away,” Tuvey added.
Mexico’s closely watched core price index, which strips out some volatile food and energy prices, climbed 0.42% in early October, slightly above market expectations of 0.35%.
Considering the core index, INEGI said, prices of goods rose 0.53% and services were up 0.30% in the period.
Within the non-core index, prices of agricultural products fell 0.46% while those of energy and government-authorized tariffs rose 1.3%.
Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, said base effects, weakening domestic demand and the lagged effect of tighter financial conditions are expected to continue to push inflation down in Mexico.
“Underlying pressures are finally stabilizing, and we still believe inflation will continue to fall consistently over the next few months.” (Reporting by Mexico City newsroom and Gabriel Araujo; Editing by Louise Heavens, Kirsten Donovan)