MexECON Blog

November CPI Up 4.3 Percent YOY

Mexico's November consumer price index (CPI) was up 4.3% from the same month one year earlier, according to a report Thursday from Banco de México.  The November inflation rate was much worse than the 4.0% increase in the year to October and the year-over-year increases of 3.7% in the two months before that.  Mexico's inflation rate is now at its highest since April.  According to the report, the acceleration in inflation during November came mostly from a big jump in fresh vegetable prices.  Excluding the volatile categories of food, energy, and administratively-determined prices, the November core CPI was up 3.6% year-over-year, just as it was in October and September.  The November producer price index (PPI) was up 3.4% year-over-year, up from a 3.3% increase in the year to October.

Comment:  The recent acceleration in Mexico's CPI could be a short-lived blip, as happened in the spring.  However, excess liquidity in the developed countries and strong economic growth at home have caused genuine inflation problems in many emerging markets, such as Brazil and India.  The same forces could be stoking longer-lasting price pressures in Mexico as well.  Policymakers at Banco de México have repeatedly said the country's inflation rate should fall to their target of 3.0% by the end of 2011.  If so, the policymakers should be able to hold interest rates at their current low levels to support Mexico's economic recovery.  If price pressures do not recede promptly, however, the policymakers may have to raise rates significantly earlier than many observers are now expecting. 

Patrick Fearon, CFA
Vice President, Fund Management

                                Mexico's Consumer Price Index (CPI)
                                   Percent Change, Year-Over-Year
                                        Source:  Banco de México
CPI 1011

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