Mexico headline inflation going down and stable in its core

Mexico's CPI increased 0.46% 2w/2w due to the seasonal adjustment in electricity tariffs partially offset by declines in gasoline prices, coming in lower than market expectations. Annual inflation declined to 2.47% y/y from 2.51% previously, with core inflation inching up to 2.46% from 2.42%, as a result of some increases in the "other core goods" prices (car prices mostly).

"The number is in line with our 2.5% year-end forecast. In the coming months, the core component should continue going up, but the annual number should be still below 3% as we expect core inflation to reach 2.7% in December. The fact that the MXN has stabilized reduces the risk to observe additional pressures in the durable goods component, while gasoline prices and prices of telecomm services could observe reductions starting in 2016", says Barclays.

Short-term inflation expectations continue to move down as recent prints have surprised on the downside, while medium-term expectations remain stable at 3.4%.

"In that sense, this figure confirms our view that Banxico will likely remain on hold for many months ahead and it might not start hiking until June 2016, regardless of any US Fed action, as inflation is expected to hover around 3% during 2016",added Barclays.