Mexico's March consumer price index (CPI) was up 3.1% from the
same month one year earlier, accelerating from a February increase
of 3.0% and matching the inflation rate in January. The
rebound in March came mostly from higher prices for tomatoes,
lemons, eggs, and gasoline. Excluding the volatile categories
of fresh foods, energy, and government-set prices, the March "core"
CPI was up just 2.4%, exactly as it was in the previous month.
At the wholesale level, the March producer price index (PPI) was
up 2.6% year-over-year, marking an acceleration from the February
rise of 1.9% but matching the increase in January.
The report was released today by INEGI, the official statistics
Comment: Because of a sales tax
increase in January 2014, inflation in Mexico was elevated
throughout last year. Now that the tax hike has dropped out
of the calculation, the inflation rate is much more moderate.
Inflation continues to hover around Banco de México's medium-term
target of 3.0%. Some observers expect it to fall below target
in the coming months. If so, it could make it more difficult
for the monetary policymakers to set the proper level of interest
rates going forward. The policymakers have promised to raise
rates if necessary to counter any further weakening in the peso or
to calm any market volatility when the Federal Reserve eventually
raises U.S. interest rates, but low inflation could make them
hesitate a bit in doing so.
Patrick Fearon, CFA