Mexican mid-January inflation seems to have accelerated to 3.76 pct

Mexico’s mid-January inflation is expected to have surged in January, owing to increase in gasoline prices. In spite of the below expected inflation seen in the second half of December, inflation is seen to be accelerating at a much quicker rate in January. The main factor leading to a weaker second half December bi-weekly inflation was the fall in food prices and  this might carry on impacting food and the overall headline inflation for a few additional months, noted Societe Generale.

But, many other components of food prices are facing risks on the upside because of the weakening currency. Depreciation of the Mexican peso is also expected to contribute to the price pressure in many core goods categories. Finally, Pemex’s decision to increase prices of gasoline by almost 20 percent will also push inflation in energy intensive sectors higher beginning from January.

“On a bi-weekly basis, we estimate inflation to have risen to 3.76 percent yoy in mid-January from 3.24 percent in the second half of December”, added Societe Generale.

Inflation could have surpassed the Bank of Mexico’s target range in January had it not been for the declining food prices. However, this still continues to be a possibility.

“In the medium term, we expect inflation to rise to an average of 4.2 percent in 4Q17, followed by some moderation in 2018/19”, stated Societe Generale.