MexECON Blog

August CPI Rises 3.7 Percent YOY

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
CPI 1008

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