MEXICO: Temporary Rise Of Inflation Above Target Unlikely To Derail Rate Cuts
May-22 13:01
- Today’s bi-weekly CPI data confirmed what is expected to be a temporary rise of headline inflation above Banxico’s 2-4% target range ceiling on the back of a larger than expected jump in food prices. Core prices were in line with expectations, but the annual rate there remained very close to that 4% ceiling, amid sticky core services pressures and a further gradual normalisation of core goods inflation from low levels.
- As noted previously, JP Morgan expects the rise of headline inflation above target to be short-lived, with food price pressures fading quickly. Sequentially, they think the worst is past for core goods inflation and see an expected peak in the 3m/3m run rate around 4.9%ar by June, slightly above Banxico’s 4.6% forecast.
- Ahead of the data, BBVA said that the H1 May CPI print would be relatively high due to sticky energy prices and upward pressure from fresh produce. However, they do not expect the data to shift Banxico from the guided 50bp cut at the next meeting.
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