MexECON Blog

Inflation Continues to Cool in February

Mexico's February consumer price index (CPI) was up just 3.0% from the same month one year earlier, after a rise of 3.1% in the year to January.  Prior to that, inflation had been running at a rate of 4.1% in December, 4.2% in November, and 4.3% in October.  The inflation rate in February was the lowest in almost four years.  Much of the improvement in the second month of the year came from lower prices for electricity and other energy goods.  Lower costs for a range of agriculture goods also helped.  However, excluding the volatile categories of fresh foods, energy, and government-set prices, the February "core" CPI was up 2.4% year-over-year, accelerating from the rise of 2.3% in January.

At the wholesale level, the February producer price index (PPI) was up 1.9% year-over-year, after a rise of 2.6% in January and an increase of 3.3% in December.

The report was released today by INEGI, the official statistics agency.

Comment:  Mexican inflation had long been expected to cool beginning in 2015, as the sales tax increases of January 2014 fell out of the calculation.  However, the fall in inflation during February was based primarily on the surprising decline in global energy costs that began last year.  Inflation in Mexico has now reached the central bank's medium-term target, and both the monetary policymakers and many outside analysts expect price hikes to fall below that target in the coming months.  The Mexican government and Banco de México have worked hard to reassure investors that they stand ready to respond aggressively in order to support the peso once U.S. interest rates start rising (most likely this summer), but cooling inflation has the potential to delay any such move until later than many people expect. 

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1502

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