Mexican inflation seems to have surpassed Banxico’s target in October

Mexico’s inflation is likely to have surpassed Bank of Mexico’s target rate in October. Recent acceleration in CPI was mainly driven by food and the government-induced increase in transport prices. Given that the core inflation is already above the central bank’s target rate and other few consumption segments facing the impacts of peso pass-through, the process of moderate acceleration of inflation is expected to continue in the near term, according to Societe Generale.

“Inflation likely rose to 3.16 percent yoy during the second fortnight of October leading to overall monthly inflation at 3.13 percent yoy”, added Societe Generale.

However, beyond next two to three quarter, the labor market is likely to stabilize as growth moderates and the impact of peso depreciation wanes. This would likely steady the inflation below the Banxico’s target ceiling of 4 percent.

During that point in time, the persistent weakness of dwelling inflation, which actually eased to 0.12 percent in September, might be one of the major risks on the downside to the medium-term inflation outlook. If the peso stabilizes and strengthens after the U.S. presidential election, the Mexican inflation outlook might moderate sooner than anticipated, stated Societe Generale.