MexECON Blog

March Inflation Accelerates Slightly

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 agency.

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
Portfolio Manager

CPI 1503

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