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%
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
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