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MEXICO-ECONOMY-INFLATION
Mexican inflation drops to lowest level in 17 months
MEXICO CITY, June 8, 2018 (Xinhua) – Mexico’s annual inflation rate dropped
to 4.51 percent in May, its lowest level in 17 months, due to a drop in
electricity prices in certain parts of the country, the National Institute of
Geography and Statistics announced Thursday.
The National Consumer Price Index (INPC) saw its lowest rate in May since
the 3.36 percent seen in December 2016.
However, it remains above the official permanent target of 3 percent set by
Mexico’s central bank Banxico.
In May alone, the INPC shrank 0.16 percent from the previous month, due to
Mexico’s traditional electricity subsidies during hot weather in the north of
the country, which reduced prices for customers by 22.32 percent.
However, the increase in domestic gas prices (7.22 percent), fuel (1.08
percent), chicken (3.41 percent) and air transport (22.02 percent) limited
the drop of the inflation rate.
The underlying inflation rate, a reference used by the central bank when
setting monetary policy, increased 0.26 percent in May to reach an inter-
annual rate of 3.69 percent.
Joan Enric Domene, an economic analyst from Mexican bank Invex, reported
that while inflation has continued to drop, the rise of global oil prices
continues to put pressure on fuel prices and transport services.
Furthermore, the peso’s weakness against the U.S. dollar could halt the
inflation’s downward slide, he added.
“The accumulation of pressures against the peso could tip the balance so
that Banxico decides to increase its reference (interest) rate at its next
meeting,” the analyst said.
Mexico’s central bank has a monetary policy meeting set for June 21, with
its interest rate currently at 7.5 percent.
On May 30, Banxico Governor Alejandro Diaz de Leon was confident that
inflation would continue to drop close to the government target of 3 percent
in 2019.
However, the continuing strength of the dollar, Mexico’s upcoming
presidential elections in July and continued uncertainty over the fate of the
North American Free Trade Agreement talks present risks to the peso.
BSS/XINHUA/HR/1445