In a Thursday report from the central bank, Mexico's August
consumer price index (CPI) was up 3.7% from the same month one year
earlier. That was slightly worse than the July inflation rate
of 3.6%, but it was still well below the 5.0% rate reached in March
and the 6.5% rate in December 2008.
Comment: The resurgence in
Mexican inflation at the beginning of the year was worrisome, but
in spite of the uptick in August, price increases now look like
they are once again on a sustained downtrend. That suggests
Mexican policymakers can leave interest rates at their current low
levels in order to support the country's economic recovery.
Leaving interest rates low is important because, in spite of
Mexico's strong rebound to date, its recent economic growth has
been heavily dependent on rising exports to the United States -
particularly exports of trucks, autos, and auto parts. That
is not a very broad foundation on which to build a lasting
recovery. In this environment, continued low interest rates
provide some insurance against a stall in U.S. demand.
Patrick Fearon, CFA
Vice President, Fund Management
Mexico's Consumer Price Index (CPI)
Percent Change, Year-Over-Year
Source: Banco de México