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Inflation climbs to 4.67% in Mexico, the worst record in more than two years

2021-04-08T17:10:59.648Z

The consumer price index rose almost 1% in March compared to the previous month. The rise is due, in large part, to the increase in the price of oil



A woman serves corn tortillas in a house in Tepeteopan, Puebla state.CARLOS JASSO / Reuters

Prices in Mexico continue to rise.

In March, inflation reached its highest level in more than two years, reaching 4.67%, according to data from the National Institute of Statistics and Geography (Inegi) published this Thursday.

The rise is due, in large part, to the continuous increase in the price of oil in international markets, as well as to the price of food within the country.

Experts expect inflation to continue rising and the Bank of Mexico, in charge of maintaining price stability, walks a fine line between contributing to economic recovery and containing inflation.

The National Consumer Price Index registered an inflation of 0.83% in March compared to the previous month, which places annual inflation at 4.67% - its highest level since December 2018 and well above the so-called range. target imposed by the central bank of between 2% and 4% -.

The prices of agricultural products, such as food, rose 1.27% in the month and those of energy, whose rates are authorized by the government such as gasoline and LP gas, increased almost 2%.

"Food, beverages and tobacco and other services continued to show significant increases," said economic analysts from the firm Finamex in a report.

"This is mainly due to targeted increases, such as the price of tortilla, in the first case, and seasonal effects in tourism-related services in the second," they added.

Finamex expects annual inflation registered in April to be 5.5%.

On March 25, at its meeting to decide on monetary policy, the Board of Banco de México recognized the risk that inflation will continue to rise, so it was decided not to cut the reference interest rate and keep it at 4%.

The interest rate is one of the most important tools for the central bank.

By keeping it low, the lending of resources by banks is encouraged to contribute to economic activity.

By keeping it high, the economy is prevented from “heating up”, that is, from accelerating economic activity to such a degree that inflation shoots up.

The decision was made "considering the inflation forecasts described, the risks to which they are subject, as well as the convenience of consolidating a decreasing trajectory for inflation," according to the minutes of the meeting published by the bank on Thursday.

"Going forward, the conduct of monetary policy will depend on the evolution of the factors that affect inflation, on their expected trajectories in the forecast horizon and on their expectations."

"From this fortnight and until the second half of May, the annual data will be affected by a low comparison base of energy prices," wrote economists from Finamex.

This will lead to a significant rise in inflation, they assured, “during this period, we will be attentive to the evolution of the prices of non-food goods and other services since, from our point of view, they are the ones that could exert greater additional pressure on the underlying component.

Even if this is not the case, we do not expect headline inflation to be below 4% before July ”.

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Source: elparis

All news articles on 2021-04-08

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