| | |  Business News | November 2008 
Mexico’s Inflation Accelerates More Than Forecast
 Jens Erik Gould - Bloomberg
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 |  | There is a real possibility that at the end of the year we’ll have inflation above 6 percent.
- Fernando Losada |  | | | |
Mexico’s consumer prices rose more than forecast in the first half of November, pushing the annual inflation rate above the central bank’s target for the quarter, on higher costs for electricity, meat and vegetables.
Prices climbed 0.94 percent in the first 15 days of November from a month earlier, the central bank said today, more than the 0.59 percent median estimate of 15 analysts surveyed by Bloomberg. Annual inflation was 6.18 percent.
The data signals that price increases may exceed the central bank’s forecast for an average of no more than 6 percent in the fourth quarter, forcing policy makers to delay a cut in the benchmark interest rate in the beginning of next year, said Fernando Losada, an economist at Deutsche Bank Securities Inc.
“There is a real possibility that at the end of the year we’ll have inflation above 6 percent,” said Losada, who is based in New York. “With a number like that, it will be very difficult for the central bank to cut rates in spite of the obvious deceleration of the economy.”
The central bank has kept its benchmark interest rate unchanged at 8.25 percent the past two months as policy makers balanced concern the economy will slow amid a worldwide credit crunch with predictions that inflation may accelerate again.
Annual inflation quickened to a seven-year high in October, cementing expectations that the central bank won’t cut interest rates this year. Core inflation, which excludes some food and energy costs, was 0.32 percent in the first half of November.
Inflation 'In the Pipeline'
Central bank Governor Guillermo Ortiz told reporters at a conference in Mexico City today that the country still has inflationary pressures “in the pipeline.”
“All emerging countries have experienced currency depreciations, which have an inflationary impact,” Ortiz said. “In our case, and in the case of emerging countries, the risk of deflation is very far away.”
The central bank has said that the world economic slump, and particularly the slowdown in the U.S., is hurting Mexico’s economy. On Oct. 9, President Felipe Calderon sent a revised 2009 budget proposal to Congress that lowered forecasts for economic growth next year to 1.8 percent from 3 percent.
Inflation will likely peak at 6.2 percent or 6.3 percent, said Rafael de la Fuente, senior economist at BNP Paribas SA in New York. Still, the bank will probably cut the key lending rate in the first quarter of next year, he said. De la Fuente forecast the economy will contract 0.8 percent next year.
“It’s a really bad number,” said Alberto Bernal, an economist with Bulltick Securities Corp. in Miami, talking about today’s inflation data. “It delays the beginning of the easing cycle.”
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net. |
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