Mexico Less-Than-Forecast Inflation Greets New Banxico Chief
(Bloomberg) -- Mexico’s annual inflation slowed more than expected in early December, as a new central bank governor prepares to take office amid questions about the institution’s independence.
Consumer prices rose 7.45% in early December from a year earlier, less than the 7.7% median estimate of economists surveyed by Bloomberg. Just two weeks ago, annual inflation had reached 7.7%, its fastest pace since early 2001. From the prior month, prices rose 0.1%, also below forecasts.
In a less promising sign, core inflation accelerated to 5.87%, from 5.67% two weeks earlier. The figure, which excludes volatile items like fuel, is closely watched in Mexico.
The central bank, known as Banxico, sped up the pace of monetary tightening last week to rein in inflation expectations, delivering a half-point hike that took the overnight rate to 5.5%. Outgoing Governor Alejandro Diaz de Leon said Banxico isn’t committed to further half-point hikes in the future, and that it expects inflation to peak in the last quarter of this year.
Deputy Banxico Governor Jonathan Heath put a halt to any relief about slowing consumer price increases, writing on Twitter that core inflation “continues upwards.”
“This is not good news, since the crux of the problem persists,” he said.
Adding uncertainty to future monetary policy decisions is the new central bank governor picked by President Andres Manuel Lopez Obrador after he retracted his previous nominee. Victoria Rodriguez Ceja, who will replace Diaz de Leon at the start of 2022, has a long history of public service, but little monetary policy experience.
Janneth Quiroz Zamora, vice president of economic analysis at Monex, echoed Heath’s concerns: “Core kept on its upward pressure,” she said. “We don’t rule out another rebound” of inflation in the coming weeks.
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