Mexico's September consumer price index (CPI) was up just 3.1%
from the same month one year earlier, slowing from the
year-over-year increases of 3.4% in August and 3.5% in July.
Mexican inflation is now running at its lowest rate since briefly
touching the central bank's target of 3.0% in March.
According to today's report, from the official statistics agency
INEGI, much of the decline in inflation during September stemmed
from moderating prices for fresh foods, most notably avocados,
tomatoes, plantains, and chicken. Excluding the volatile
categories of fresh foods, energy, and administratively-determined
prices, the September "core" CPI was also up just 3.1%
year-over-year, compared with a rise of 3.2% in the year to
At the wholesale level, inflation remained much higher than at
the retail level. The September producer price index (PPI)
increased a strong 7.7% year-over-year, up from a rise of 6.7% in
August. Producer inflation in Mexico has now accelerated for
four straight months, and it stands at its highest level since late
Comment: Mexico's unusual,
crop-destroying freezes last winter continue to put some upward
pressures on food prices, but those pressures are clearly
dissipating. In addition, the global economic slowdown has
helped bring down a broad range of commodity prices, and concern
about slowing growth is probably helping to hold down wage
pressures. Mexico still faces some upward price pressures
from the recent sharp decline in the peso and the simple fact that
its economy continues to grow at a relatively good pace.
Nevertheless, the most likely scenario is that the country's
inflation rate will remain roughly stable in the near term.
That should allow Banco de México to keep interest rates at their
current low levels in order to buttress the economy against the
Patrick Fearon, CFA
Vice President, Fund Management