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Mexico Prices Rise Less Than Forecast in December
 Jens Erik Gould & Andres R. Martinez - Bloomberg
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January 08, 2010
Mexico’s consumer prices rose less than economists forecast in December and annual inflation was the slowest in more than three years as costs for food and telephone service fell.
Prices rose 0.41 percent from a month earlier and 3.57 percent from a year ago, the central bank said today. Economists forecast monthly inflation of 0.49 percent, according to the median estimate of 14 analysts surveyed by Bloomberg.
December’s annual inflation rate was the lowest since August 2006. Consumer price increases may accelerate this year as new taxes and higher fuel prices take effect, and the bank forecasts inflation of as much as 5.25 percent in the third and fourth quarters.
December’s slower inflation is only a temporary reprieve before higher sales taxes and increased levies on income and corporate profits take effect, Eduardo Gonzalez, an economist at Citigroup Inc.’s Banamex, said in a note to clients today. Annual inflation will exceed 4 percent this month, he said.
Core inflation, which includes certain food and energy costs, was 0.5 percent in December. The peso fell 0.2 percent to 12.7573 per U.S. dollar at 2:23 p.m. New York time.
Lawmakers raised taxes for 2010 to boost revenue amid falling output at the state oil company and the worst recession since the 1930s.
The bank said last month that the higher taxes, as well as expected increases in government-set prices for goods such as gasoline, will have a one-time effect on inflation, which will slow again in 2011.
Banco de Mexico on Nov. 27 kept borrowing costs unchanged at 4.5 percent for a fourth month, saying that inflation expectations remained “well-anchored.” Policy makers cut borrowing costs by 3.75 percentage points during the first seven meetings of last year.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net; Andres R. Martinez in Mexico City at amartinez28(at)bloomberg.net
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