Inflation has remained “really persistent” in Mexico, improving slightly in February but with pressures remaining on the core index and on the prices of services, said Banco de México deputy governor Irene Espinosa.
“We are expecting, as of this second quarter, that inflation will start to drop,” the official said in statements to Reuters, on the sidelines of a conference on sustainable finance in London.
Espinosa indicated that underlying inflation is stabilizing, which he described as good news, however, he added that the central bank’s Governing Board is concerned about the increase in the prices of services, which continue to be well above their target.
Annual headline inflation in the first half of March stood at 7.12%, a decrease compared to the previous month that surprised analysts, who had expected a variation of 7.26 percent.
The deputy governor added that Banxico takes into account the monetary tightening that it has carried out in its current rate hike cycle, which began in June 2021, to fight inflation, but that “I would expect it to continue to be restrictive throughout the horizon.”
He added that the central bank will factor in Wednesday’s rate hike by the US Federal Reserve of 25 basis points in its next monetary policy decision.
This was an increase that had already been announced previously, so it is good news that there were no surprises,” Espinosa said.
Banxico’s next meeting is scheduled for March 30. The official has said that the decision on the rates could be a lower rise than the previous one of 50 basis points.
In its last monetary policy announcement, at the beginning of February, the institution surprised with a higher-than-expected increase in the reference rate of 50 base points, although it anticipated that in its next announcement on March 30 it could apply a smaller increase.
A survey by financial group Citibanamex showed that the vast majority of the market expects a quarter-point increase next week, a move similar to the one adopted by the Federal Reserve.
Headline inflation moderated in the first half of March more than expected, although it continued to be well above the official target, reinforcing the prospects that there will be a new increase in the key rate at the end of the month, albeit of a lesser magnitude than the previous.
The National Consumer Price Index (INPC) was located at 7.12% at an annual rate, below 7.48% in the second half of February, linking four consecutive fortnights in decline, according to figures released yesterday by the statistics institute, Inegi.
General inflation thus touched its lowest level since the second half of January 2022. Analysts anticipated a rate of 7.26 percent.
The underlying variable fell for the third consecutive fortnight to 8.15% annual.
