Mexico Inflation Slows to Below Target, Fueling Easing Bets

(Bloomberg) --

Mexico’s inflation slowed to slightly below the central bank’s target for the first time since 2016, bolstering economists’ expectations that policy makers will keep cutting interest rates this month.

Consumer prices rose 2.97% in November from a year earlier, less than the 3% forecast by economists in a Bloomberg survey, Mexico’s statistics agency reported on Monday. Prices increased 0.81% from a month earlier. The central bank targets inflation of 3%, plus or minus 1 percentage point.

Key Insights

• Banco de Mexico will ease borrowing costs for a fourth consecutive time to 7.25% on Dec. 19, according to economists surveyed by Citibanamex.
• The central bank has said it will lower interest rates in a gradual manner despite the fact that real rates are one of the highest among emerging markets and the economy fell in technical recession in the beginning of the year.
• Core prices, which exclude the most volatile items in the consumer basket, rose 0.22% in November from a month earlier, compared with a 0.23% estimate in a Bloomberg survey

What Our Economist Says

“Results through November continue showing resilient core inflation despite abating peso depreciation and increasing economic slack, but are in line with central bank forecasts that point to headline and core inflation in line with the target in 2020. They support expectations for the central bank to continue slowly cutting interest rates and policy makers maintaining a cautious tone.”

--Felipe Hernandez, Bloomberg Latin America economist

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, ;Juan Pablo Spinetto at jspinetto@bloomberg.net, Matthew Bristow, Walter Brandimarte

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