| | |  Business News | October 2009 
Mexico Prices Rose Less Than Forecast in September
 Jens Erik Gould - Bloomberg
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October 09, 2009
 |  | The central bank forecasts inflation will be between 4 percent and 4.5 percent in the fourth quarter, slowing to 3.75 percent to 4.25 percent in the first quarter of next year. |  | | |
Mexico’s consumer prices rose less than forecast last month, pushing the annual inflation rate below 5 percent for the first time in more than a year, as prices fell for avocados, tourism packages and air fares.
Consumer prices rose 4.89 percent last month from a year earlier, the smallest increase since April 2008, the central bank said today on its Web site. Costs climbed 0.5 percent in September from a month earlier.
While the report shows inflation is slowing, it will have little effect on monetary policy, said Ricardo Aguilar at Invex Casa de Bolsa SA. Policy makers will wait to see how President Felipe Calderon’s fiscal reform plan affects inflation before adjusting interest rates this year, he said.
“The data is positive,” said Aguilar, an economist in Mexico City who expects the bank won’t raise borrowing costs until the second half of next year. “We don’t see them raising rates soon.”
Economists expected monthly inflation of 0.57 percent and forecast an annual rate of 4.97 percent, according to the median estimates compiled by Bloomberg.
Mexico’s peso gained for a fifth day, advancing 0.3 percent to 13.3326 per U.S. dollar. The currency has advanced 2.6 percent this year.
Calderon’s proposals, which he submitted to legislators on Sept. 8 along with his 2010 budget, seek spending cuts, a wider deficit and tax increases as revenue is sapped by falling oil output and a drop in tax collection caused by the recession. The economic package may add less than 1 percentage point to inflation, according to the finance ministry.
Rate Outlook
The bank won’t raise the key lending rate until the second or third quarter of next year because the economy remains weak, said Salvador Moreno, chief economist at ING Groep NV’s Mexican unit.
The central bank forecasts inflation will be between 4 percent and 4.5 percent in the fourth quarter, slowing to 3.75 percent to 4.25 percent in the first quarter of next year.
Mexico’s $1.09 trillion economy contracted 10.3 percent in the second quarter and job losses accelerated as the recession in the U.S., which buys about 80 percent of Mexican exports, sapped demand for its products.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net
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