MexECON Blog

February CPI Rises 3.6 Percent YOY

Mexico's February consumer price index (CPI) was up just 3.6% from the same month one year earlier, decelerating from year-over-year gains of 3.8% in January and 4.4% in December.  Overall inflation in Mexico is now at its lowest since last July.  According to the report, from Banco de México, the slowdown in inflation during February came mostly from weaker price rises for fresh foods and energy products, as well as smaller increases in government-set prices.  Nevertheless, those prices are still up more than other categories over the last year.  Excluding the volatile categories of food, energy, and administratively determined prices, the February "core" CPI was up just 3.3% year-over-year, matching its increase in January.  The February producer price index (PPI) was up 3.5% year-over-year. 

Comment:  The second straight month of moderating inflation in Mexico is a relief, given that many other large, developing countries are experiencing bigger and bigger price increases.  If Mexican inflation continues to moderate, policymakers at the central bank could well reach their inflation goals for the year without having to resort to premature rate hikes.  Keeping interest rates at their current low levels would help support Mexico's economic rebound and take some of the upward pressure off the peso.  Nevertheless, with the Mexican economy expanding rapidly and policymakers in the developed countries keeping monetary policy extremely loose, there is a significant risk that Mexican inflation will worsen again in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

                                 Mexico's Consumer Price Index (CPI)
                                      Percent Change, Year-Over-Year
                                           Source:  Banco de México
CPI 1102

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