| | |  Business News | July 2009 
Mexico Inflation Slows in Early July on Recession
 Jason Lange & Robert Campbell - Reuters
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July 24, 2009
Mexico City - Mexican inflation slowed in early July as a deep recession made it harder for businesses to raise prices, though the central bank is still seen holding borrowing costs steady at its August policy review.
Mexican consumer prices rose 5.54 percent in the 12 months through July 15, the central bank said on Thursday.
That was in line with forecasts and lower than early June's 5.74 percent reading. A fall in prices for chicken, eggs and vegetables such as tomatillos helped ease inflation.
The closely watched core consumer price index, which strips out some volatile food and energy prices, rose 0.21 percent during the first two weeks of the month.
"In this two-week period we had the highest core inflation in the last seven reports, which is not a good sign. Inflation continues to trend lower but not at a fast enough pace to put it within the goal of the central bank," said Mario Correa, a economist with Scotiabank in Mexico City.
Inflation has been slowing this year but remains well above the 2 to 4 percent range that policy makers say they can tolerate. The bank said last week that inflation should end this year close to 4 percent.
Policymakers have lowered interest rates this year seven times in as many months in a bid to jump-start the stalled economy, though last week the central bank said it would pause its rate-cutting campaign.
Slammed by the U.S. downturn, Mexico's economy is expected to shrink more than 6 percent this year in what could be the deepest contraction since 1932.
Analysts see the bank holding its benchmark overnight rate steady at its next policy meeting on Aug. 21, though some think policy makers could reduce rates later in the year.
Mexican interest rate futures <0#TII:> did not budge following the data's release, suggesting investors had not changed expectations for the direction of monetary policy.
Consumer prices rose 0.20 percent in the first half of July from June. Analysts in a Reuters poll had expected a reading of 0.19 percent ECONMX.
Headline prices had risen 0.13 percent during the first half of May, while core prices rose 0.15 percent during that period.
(Editing by James Dalgleish) |
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