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 Business News | April 2005 
Inflation Accelerates by 0.45 Percent in March
 Wire services
| | The rising consumer price index may lead Central Bank Governor Guillermo Ortiz this month to raise interest rates for the 13th time since February 2004. |
Consumer prices rose at their fastest pace in four months in March as higher international oil prices pushed up the cost of gasoline, natural gas and jet fuel.
Consumer prices rose 0.45 percent after increasing 0.33 percent in February, the central bank said. March's increase, the biggest since November, was above the 0.42 percent median estimate in a Bloomberg survey of 15 economists. Inflation in the 12 months through March quickened to 4.39 percent from 4.27 percent in February.
Faster inflation may lead Central Bank Governor Guillermo Ortiz this month to raise interest rates for the 13th time since February 2004, said Neil Dougall, who heads emerging market research at Dresdner Kleinwort Wasserstein in London.
"With the pickup of inflation expectations, the job is not finished; tightening is needed," Dougall said.
Dougall said he expects the central bank to raise rates at its April 22 meeting after leaving them unchanged at a policy meeting tomorrow. The overnight interbank lending rate has climbed to 9.47 percent from 4.62 percent in January 2004.
Ortiz, 56, said as recently as Jan. 31 that he expected the inflation rate to remain "high" for several months before declining toward the central bank's 2 percent to 4 percent target range by yearend. Inflation was 5.19 percent in 2004.
Tomatoes, Avocadoes
The surge in oil prices may make it tougher for Ortiz to bring inflation down within the target range, said Suhas Ketkar, an economist at Royal Bank of Scotland. Crude oil surged to a record high of US58.28 a barrel on April 4 in New York and is up 60 percent from a year ago. Petroleos Mexicanos, the country's staterun oil company, boosted jet fuel by 4.6 percent on March 22 to US378.12 per 1,000 liters in response to the rise in international prices.
"Concerns like energy prices are driving most analysts to expect a pickup in inflation," Ketkar said in a telephone interview from New York.
Price rises on tomatoes, avocadoes and tourism services also led the pickup in inflation in the month, the central bank said. Mexico's core inflation rate, which excludes energy and food prices, fell to 0.31 percent in the month from 0.42 percent in February, the bank said.
Wage Increases
Ortiz is also watching wage negotiations between workers and companies to determine if salary increases may push up prices as Latin America's biggest economy grows at about 4 percent and begins to add more jobs, Ketkar said. Average negotiated wage increases were 4.5 percent in February and 4.3 percent in December, according to the Labor Ministry.
"They are monitoring if the increase in inflation is somehow going to spill into higher negotiations," Ketkar said. "You want to nip that in the bud."
The inflation rate, while rising, remains one of the lowest in Latin America. Brazil, the region's second-biggest economy, had annual inflation of 7.4 percent in February. Argentina had annual inflation of 9.1 percent in March.
Ortiz has said Mexico's goal is to push down its inflation rate in line with its North American Free Trade partners. The United States' annual inflation rate was 3 percent in February while Canada's was 2.1 percent. |
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