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Mexico Prices Rise More Than Expected at Mid-Month
 Jens Erik Gould - Bloomberg
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January 22, 2010
Mexico’s consumer prices rose more than forecast in the first half of January as the cost of gasoline and subway fares increased.
Prices rose 0.75 percent in the first 15 days of the month from a month earlier, the central bank said on its Web site. Economists expected an increase of 0.63 percent, according to the median of 14 estimates in a Bloomberg survey.
Today’s report won’t prompt the bank to raise borrowing costs soon because the bulk of the increase in consumer prices was in non-core goods such as gasoline, which policy makers expected, said Benito Berber, an economist with RBS Securities. Core inflation, which excludes some food and energy costs, was lower than expected, he said.
“I don’t think inflation expectations should increase,” said Berber, who is based in Stamford, Connecticut. “Therefore, the bank should not reevaluate its monetary policy.”
Mexico’s central bank will raise the benchmark interest rate in July, according to the median forecast of economists in a Jan. 12 survey by Citigroup Inc.’s Banamex unit. Berber forecasts an increase in the second half of the year.
The annual inflation rate was 4.17 percent in the first half of the month, compared with 3.57 percent in December, the bank said. The monthly core inflation rate was 0.42 percent, compared with 0.49 percent forecast in the Bloomberg survey.
Inflation Forecasts
The central bank forecasts annual inflation will climb to as high as 4.75 percent in the first quarter, 5 percent in the second quarter and 5.25 percent in the third and fourth quarters, boosted in part by higher gasoline and electricity prices.
Tax increases that took effect this month will have a one- time impact on consumer prices, central bank chief economist Manuel Ramos Francia said.
“We don’t see generalized pressure on prices in the future,” Ramos Francia said in an interview with Mexico City- based Radio Formula.
Mexico increased taxes last year in a bid to rein in a budget deficit swelled by tumbling oil output and the worst recession since the 1930s. The government began increasing prices for state-controlled goods such as gasoline last month.
The inflation rate in the first half of January underscores the increases in the prices of state-controlled goods at the beginning of the year, said Jimena Zuniga, a Latin America economist at Barclays Capital in New York.
‘Front-Loaded’
“This does not necessarily entail a higher overall effect of those public price hikes but could reflect a more front- loaded one,” Zuniga said.
Gross domestic product contracted less than analysts forecast in the third quarter and expanded from the previous three months, signaling an end to the recession.
The economy shrank 10.1 percent in the second quarter from a year earlier, and 6.2 percent in the third quarter from a year earlier.
The peso rose 0.3 percent to 12.9290 at 12:08 p.m. New York time.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net.
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