50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

Mexico's annual inflation hits lowest since August 2021, beating forecasts

Published 06/08/2023, 09:00 AM
Updated 06/08/2023, 09:06 AM
© Reuters. A woman buys vegetables at a market stall in Mexico City, Mexico, January 2, 2018.  REUTERS/Daniel Becerril

MEXICO CITY (Reuters) - Mexico's annual inflation rate slowed in May for a fourth consecutive month to 5.84%, data from statistics agency INEGI showed on Thursday, beating forecasts and continuing a downward trend spurred by a long cycle of rate hikes.

Headline inflation came in below a forecast of 5.90% and is now at its lowest since August 2021.

Consumer prices fell 0.22% in May from April, according to non-seasonally adjusted figures, against an expected drop of 0.16%.

Nonetheless analysts say future drops in inflation may now be trickier, prompting a delay in rate cuts.

Jason Tuvey, Deputy Chief Emerging Markets Economist at Capital Economics said that inflation forecasts remained overly optimistic.

"We expect headline inflation to fall further over the coming months. But the strong labour market and rapid wage growth... mean that inflation is likely to stay higher than most anticipate over the next couple of years," he wrote in a note on Thursday.

"As a result, while the tightening cycle has ended, rate cuts are likely to come later and be more gradual than most anticipate."

Banxico, as the Mexican central bank is known locally, kept the benchmark interest rate stable at 11.25% last month for the first time in nearly two years, but warned that the rate needed to stay at this level for an "extended period."

Banxico does not expect inflation to reach its target rate of 3%, plus or minus a percentage point, until late 2024.

© Reuters. A woman buys vegetables at a market stall in Mexico City, Mexico, January 2, 2018.  REUTERS/Daniel Becerril

The closely watched core price index, which strips out some volatile food and energy prices, climbed 0.32% during May, less than the 0.39% seen in April.

Annual core inflation, considered a better gauge of price trends, was 7.39%, as forecast.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.