| | |  Business News | January 2009 
Mexican 2008 Inflation 6.5 pct, Highest in 8 Years
 Jason Lange - Reuters
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 |  | The United States buys about 80 percent of Mexican exports, and a steep drop in U.S. consumer spending led Mexican factories to lay off almost 270,000 workers on full contracts in 2008. |  | | |
Mexico City - Mexican consumer prices rose at their fastest pace in eight years in 2008, but the inflation spike may not be enough to stop the central bank lowering borrowing costs soon to aid the ailing economy.
Prices jumped 6.53 percent in the 12 months through December, more than double the central bank's inflation target, the bank said Thursday.
Policymakers may nevertheless cut rates soon as evidence piles up that a sharp U.S. recession is dragging hard on Mexico's key export sector, said Gray Newman, an economist at Morgan Stanley in New York.
“There's probably a lively debate at the central bank that the cut should be moved forward to January,” Newman said.
The central bank reviews monetary policy next on Jan. 16.
The United States buys about 80 percent of Mexican exports, and a steep drop in U.S. consumer spending led Mexican factories to lay off almost 270,000 workers on full contracts in 2008, according to labor ministry data.
Annual inflation rose in December from 6.23 percent in November, driven by higher costs for food and energy.
Many economists expect the central bank will lower its benchmark overnight rate from 8.25 percent in the first quarter though December's high reading could push policymakers to wait a few months for the slowing economy to dull price increases.
“Inflation has been an unpleasant surprise,” said Alfredo Thorne, chief economist for Mexico at J.P. Morgan Chase, who expects a rate cut in March.
Closely watched core inflation, which strips out some volatile food and energy prices, was 0.62 percent in December.
In November headline consumer prices rose 1.14 percent while core prices climbed 0.50 percent.
(Editing by James Dalgleish) |
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