Mexico's November consumer price index (CPI) was up 4.2% from
the same month one year earlier, after increases of 4.3% in October
and 4.2% in September. According to the report, the slight
slowdown in inflation during November came mostly from declining
prices for some foods, such as onions and chicken, and for
gasoline. Excluding the volatile categories of fresh foods,
energy, and government-set prices, the November "core" CPI was up
3.3% year-over-year. Core inflation has now been stuck at
3.3% for three straight months.
At the wholesale level, inflation moderated more
significantly. The November producer price index (PPI) was up
just 2.7% year-over-year, after increases of 2.9% in October, 3.0%
in September, and 3.3% in August.
The report was released today by INEGI, the official statistics
Comment: Mexican consumers have
been discouraged by high and rising prices this year, so the slight
moderation in inflation during November is welcome news.
Cooler inflation may enable consumers to buy more aggressively
during the holiday shopping season. Moreover, the steep
decline in wholesale inflation means there are less price pressures
in the pipeline. Nevertheless, the policymakers at Banco de
México will probably remain concerned that inflation is not falling
rapidly toward their goal of 3.0%. With core inflation stuck
above that level, and with the recent weakness in the peso
threatening to eventually boost prices for imported goods and
services, it is not clear that inflation will decline to the
policymakers' goal as soon as previously expected. In a word,
today's report still points toward higher interest rates sometime
in the coming months.
Patrick Fearon, CFA
Vice President, Fund Management