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 Business News | March 2008 
Mexico March Consumer Prices Climb More Than Expected
 Jens Erik Gould - Bloomberg
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 |  | With a headline rate that high, it's obvious the central bank is not going to touch its rates for the time being.
- Jonathan Heath |  | | | |
Mexico's consumer prices rose more than twice as fast as economists expected in the first half of March, reducing speculation the central bank may cut lending rates this year.
Prices climbed 0.48 percent, the central bank said today. Economists expected 0.21 percent in the first two weeks of March, the median estimate of 14 analysts surveyed by Bloomberg. Annual inflation of 4.24 percent was the highest since October 2006.
The report, which attributed higher prices to rising costs for food, energy and tourism, signals that inflationary pressures remain a concern in Latin America's second-biggest economy and that the central bank may not cut lending rates this year, said Jonathan Heath, chief Mexico economist for HSBC Holdings Plc.
"With a headline rate that high, it's obvious the central bank is not going to touch its rates for the time being," said Heath, who doesn't forecast a rate cut for this year.
Mexico's central bank has kept its benchmark interest rate at 7.5 percent for six months as policy makers weigh their forecast for above-target inflation with concerns the economy is slowing, partly because of a slump in the U.S.
Annual inflation almost topped the central bank's first- quarter estimate of 3.75 percent to 4.25 percent. The bank estimates annual inflation may reach 4.5 percent in the second and third quarters, above its target of no more than 4 percent.
Mexico's local-currency bonds fell today, pushing up the yield on the benchmark security by the most in two months, because of the lessened expectations for a rate cut.
Peso Strengthens
The peso gained 0.5 percent to 10.6774 per dollar at 1:33 p.m. New York time from 10.726 on March 21. The currency has strengthened 2.2 percent this year amid a widening differential between Mexican and U.S. benchmark lending rates.
Core inflation, which excludes certain items, was 0.33 percent, the central bank said on its Web site. Annual core inflation was 4.41 percent, the highest since August 2002.
Delia Paredes, senior economist at Banco Santander in Mexico City, said she still expects the central bank to cut rates in the second half of this year. Today's report reflected seasonal factors such as tourist packages for Holy Week, she said.
"We were expecting these months to be difficult for inflation before it starts to get better," Paredes said.
Central Bank Governor Guillermo Ortiz said March 7 that rising prices for commodities, including food and energy, have spurred inflation throughout the world.
The bank last month called rising food prices "the main cause of quickening inflation since 2006" and "a central concern." In January, it said new taxes and rising costs for transportation, fuel and food threatened to fan inflation during 2008.
Inflation was 0.13 percent in the first half of February.
To contact the reporter on this story: Jens Erik Gould in Los Angeles at jgould9(at)bloomberg.net. |
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