Friday, 29 Mar 2024

As Mexico inflation eases, more interest rate hikes may be on horizon

MEXICO CITY (Reuters) – Mexican consumer prices in the first half of December slipped well below the central bank’s 3.0% target, data from national statistics agency INEGI showed on Monday, likely paving the way for the bank to keep cutting the benchmark interest rate.

Prices in the year through the first half of December rose 2.63%, while they increased 0.35% during the first half of December.

“Soft inflation will allow Mexico’s central bank to continue its easing cycle. We expect a further 50 basis points of rate cuts over the coming months, taking the policy rate to 6.75%,” Nikhil Sanghani, an economist at Capital Economics, said in a report.

The Bank of Mexico on Thursday cut its benchmark interest rate to 7.25%, citing softening headline inflation and slack in the economy but highlighted concern that a recent minimum wage hike could stoke price pressures.

The closely watched core price index, which strips out some volatile food and energy prices, climbed 0.36% in early December, INEGI said. Core consumer prices rose 3.59% in the year through the first half of December.

“But with core inflation stubbornly above target and the U.S. Fed unlikely to ease policy any further, we think the easing cycle will end there,” said Sanghani.

Source: Read Full Article

Related Posts