| | |  Business News | December 2008 
Mexico’s Consumer Prices Increase More Than Expected
 Thomas Black & Valerie Rota - Bloomberg
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Mexico’s consumer prices rose more than analysts forecast in the first half of December on higher prices for tourist services, cigarettes, tomatoes and eggs.
Inflation was 0.45 percent in the first 15 days of the month, exceeding the 0.3 percent median estimate of 15 analysts surveyed by Bloomberg. Prices climbed 6.56 percent from the same period a year earlier, according to data compiled by Bloomberg.
Inflation will probably peak in December and begin to slow next year as lower costs for commodities take hold and a sluggish economy keeps companies from raising prices, said Gabriel Casillas, an economist with UBS AG in Mexico City. That should allow the central bank to ease interest rates in 2009, he said.
“Next year, commodity prices will weigh less on inflation,” Casillas said in an interview. “There is going to be no excuse for Bank of Mexico not to cut rates.”
Core inflation, which filters out volatile fresh food and energy prices, was 0.44 percent in the first half of December. Analysts had predicted core inflation of 0.25 percent.
Economists surveyed by the central bank earlier this month estimated inflation will accelerate to 6.35 percent in 2008 from 3.76 percent last year. The 32 economists in the survey predicted the economy will shrink 0.1 percent next year compared with an estimate of 1.7 percent growth this year.
Senate leaders from Mexico’s three largest political parties last week urged the Bank of Mexico to cut rates after the U.S. Federal Reserve reduced its target rate on Dec. 16 to between zero and 0.25 percent in an attempt to pull the U.S. economy out of recession. Mexico’s central bank increased its target interest rate by 0.75 percentage point to 8.25 percent between June and August to quell inflation.
Lower Mexican interest rates may give less support to the peso, which has weakened 25 percent since the beginning of August. The declining value of the peso against the dollar puts pressure on inflation because Mexico imports large amounts of U.S. goods. The currency weakened 0.4 percent to 13.2310 pesos per dollar at 11:08 a.m. New York time.
To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack(at)(at)bloomberg.net; Valerie Rota in Mexico City at vrota1(at)bloomberg.net |
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