Wednesday, July 6

Mexico inflation seen slowing in May

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MEXICO CITY — Mexican inflation is forecast to have slowed slightly in May, although it still remained far above the central bank’s target, a Reuters poll showed on Monday, reinforcing bets that the key interest rate will go up again later this month.

The median forecast of 20 analysts surveyed was for annual inflation to hit 7.61% in May, a slight drop from the 7.68% reached in April.

Meanwhile, annual core inflation, which strips out some volatile food and energy items, was forecast to reach 7.24% year-on-year, up from 7.22% in April.

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The Bank of Mexico, which has an inflation target of 3% plus or minus one percentage point, has increased its benchmark interest rate by 300 basis points since mid-2021 to its current level 7.0% as it battles soaring consumer prices.

Central Bank Governor Victoria Rodriguez said last week that if necessary the key rate could be raised above historical levels. The deputy governor, Gerardo Esquivel said that “an increase of 75 basis points is on the table,” but that a final decision was yet to be made.

The bank’s latest projection is for annual inflation levels to reach its 3% target in the first quarter of 2024.

In May alone, Mexican consumer prices are estimated to have increased by 0.14% through the month according to the Reuters survey, with core inflation seen surging 0.55%.

Mexico’s national statistics agency will publish consumer price index data for May on Thursday. (Report by Valentine Hilaire; with additional reporting by Gabriel Burin in Buenos Aires and Raul Cortes Fernandez; Writing by Isabel Woodford Editing by Tomasz Janowski)