MexECON Blog

September CPI Rises 3.7 Percent YOY

Mexico's September consumer price index (CPI) was up 3.7% from the same month one year earlier, according to a report today from Banco de México.  That matched the inflation rate in August, and it was only slightly worse than the 3.6% rate in July.  Excluding the most volatile categories and administratively-determined prices, the September core CPI was up just 3.6% year-over-year, after a rise of 3.7% in the year to August.  The decline in core inflation primarily reflected moderating prices for foods, housing, and other services.  In contrast, September non-core inflation accelerated to 3.9%, up from 3.7% in August.  In a sign that Mexican consumer inflation is likely to trend modestly lower in the coming months, the report showed slower price increases at the producer level.  The September producer price index (PPI) was up just 3.3% year-over-year, slowing from a rate of 3.7% in the year to August.

Comment:  In spite of its leveling out in September, consumer inflation in Mexico appears to remain on a downward path.  Inflation had shown a worrisome rebound to 5.0% in March, but since then it has fallen sharply.  In late summer, Banco de México Governor Carstens said in an interview that inflation should fall to the central bank's target of 3.0% by the end of 2011, and the recent data suggest he is likely to be correct.  Therefore, policymakers at Banco de México can probably leave their benchmark interest rate at its current low level of 4.50% for an extended period in order to provide additional support to Mexico's current economic recovery. 

Patrick Fearon, CFA
Vice President, Fund Management

                              Mexico's Consumer Price Index (CPI)
                                     Percent Change, Year-Over-Year
                                           Source:  Banco de México
CPI 1009

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