MexECON Blog

June CPI Rises 3.7 Percent YOY

In a report today from the central bank, Mexico's June consumer price index (CPI) was up 3.7% from the same month one year earlier.  That marked a significant improvement from the inflation rates of 3.9% in the year to May and 4.3% in the year to April.  On a month-over-month basis, the CPI was down slightly in June, mostly reflecting lower prices for a range of fresh foods.  Excluding the most volatile categories, such as fresh foods, the core CPI was up 3.9% in the year to June, compared with 4.1% in the year to May.

Comment:  Reflecting the global recession, Mexican inflation fell sharply throughout 2009.  From a cycle peak of 6.5% in December 2008, inflation fell to a low of 3.6% one year later, almost meeting the central bank's goal of 3.0%.  The decline in inflation gave Banco de México great leeway to cut interest rates aggressively.  However, inflation then staged a worrisome rebound to 5.0% in March 2010.  The renewed slowdown in prices since March is a welcome development because it will allow the central bank to keep interest rates low.  The renewed fall in inflation reflects continuing slack in the Mexican economy, and prices are likely to keep moderating until the Mexican economic recovery broadens and strengthens further.

Patrick Fearon, CFA
Vice President, Fund Management

                                            Mexico's Consumer Price Index (CPI)
                                               Percent Change, Year-Over-Year
                                                     Source:  Banco de México
CPI 1006

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