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 Business News | November 2007 
Mexico Inflation Nears Danger Zone in Early Nov
 Noel Randewich - Reuters
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Mexico City – Rising food prices lifted Mexico's inflation rate close to the central bank's danger zone in early November despite a surprise interest rate hike in October, the bank said this week.
But analysts predicted the central bank would keep interest rates steady at Friday's review.
Consumer prices rose 0.64 percent in the first half of the month, elevating 12-month inflation to 3.98 percent from 3.64 percent at mid-October, the central bank said. It aims for 3 percent annual inflation but considers up to 4 percent acceptable.
Closely watched core inflation, which strips out some volatile prices for energy and certain food products, was 0.18 percent during the first half of November.
Economists polled by Reuters on average had predicted 0.51 percent inflation and 0.16 percent core inflation.
The central bank surprised investors last month when it raised its key lending rate by 25 basis points to 7.50 percent, a measure meant to head off a potential inflation spike caused by higher prices for dairy and other foods.
Twenty-two out of 23 analysts in a Reuters poll predicted the central bank will leave interest rates unchanged at its monthly review Friday, despite the higher-than expected inflation number.
Mexico's peso was flat at 10.981 per dollar.
Economy watchers have warned that prices for agricultural goods could spike in November after catastrophic floods wiped out crops in the southern state of Tabasco, a key banana, pineapple and tropical fruit producing area.
Rising dairy and grain prices have stoked inflation across Latin America and in many parts of the world. Fast-developing countries like India and China are demanding more food and grain is increasingly being diverted for use in biofuel.
The central bank said last month a planned tax hike will drive inflation above 4 percent for much of 2008, but that the spike would peak before midyear.
Mexico's Congress approved a landmark tax reform in September that will raise about $11 billion in extra taxes in 2008, largely from companies.
Additional reporting by Lizbeth Salazar; Editing by David Gregorio |
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