Mexican inflation seems to have accelerated in January, likely to peak to 5.5 pct in near term

Mexican inflation is expected to have accelerated in January. It had risen sharply in mid-month due to sharp increase in gasoline prices by Pemex. Government-approved energy prices were up 12.7 percent between December end and mid-January, resulting in inflation of 16.5 percent year-on-year in that segment, noted Societe Generale in a research report. This led to inflation accelerating to 4.78 percent year-on-year through mid-January.

“Considering that Pemex implemented a hike in gasoline prices of 20 percent, we suspect that some of the effect could be felt through the second of the half month as well”, stated Societe Generale.

Moreover, core inflation also accelerated in nontradable and tradable segments in the first half of January. According to Societe Generale, an extension of these trends leads to an estimation of full-month inflation at 4.9 percent year-on-year, while second half inflation probably accelerated above 5 percent.

Meanwhile, food inflation is expected to stay low given the solid base impact. Inflation is likely to accelerate to 5.5 percent in the third quarter of this year. But the persistent pressure on the Mexican peso might add stronger price pressure in many core goods categories resulting in higher-than-anticipated peak inflation.