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 Business News | April 2008 
Mexico Inflation Quickens to Fastest Since May 2005
 Jens Erik Gould - Bloomberg
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Mexico posted the fastest annual inflation since May 2005 as prices in the first half of April surged for food, gasoline and housing.
Consumer prices climbed 4.53 percent from a year earlier and 0.06 percent compared with the previous month, the central bank said. Economists expected prices to fall 0.11 percent from March, according to the median estimate of 16 analysts surveyed by Bloomberg.
Annual inflation exceeded the central bank's estimate of as much as 4.50 percent in the second quarter, reducing the likelihood that the bank will cut its benchmark interest rate in coming months.
"The possibility of cutting rates soon doesn't exist anymore," said Guillermo Aboumrad, a senior economist at Banco UBS Pactual in Mexico City. "We have to wait for the inflation trend to slow."
Core inflation, which excludes some food and energy costs, was 0.25 percent, faster than the 0.16 percent expected in the Bloomberg survey.
Policy makers kept the benchmark interest rate unchanged for a sixth month last week, balancing their forecast for above- target inflation against concerns that the economy is slowing.
Food Prices
The bank said last week that the rise in food prices had outpaced forecasts and that it expected inflation to accelerate in coming months. It said it will revise its inflation forecast in next week's consumer price report.
The bank, known as Banxico, is keeping borrowing costs unchanged as the U.S. Federal Reserve has cut rates to 2.25 percent from 5.25 percent in September to spur a slowing economy.
Unfavorable weather and greater demand for exports were behind a rise in tomato prices, the bank said. Seasonal discounts in electricity rates also had less impact on prices than they did last year, it said.
"This makes it difficult for the central bank to ease monetary policy in the second half of the year," said Bertrand Delgado, a Latin America economist at IDEAglobal Inc., a New York-based research firm.
Mexico's peso-denominated bonds fell after the inflation report.
Yields on the 10 percent bond due December 2024 rose 2 basis points, or 0.02 percentage point, to 7.81 percent, the highest since Jan. 21. The bond's price fell 0.22 centavo to 120.3 centavos per peso at 10:06 a.m. New York time, according to Banco Santander SA.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net. |
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