Mexican headline inflation likely to average 3.5% in 2016

Mexican inflation dropped by 1 percent in January 2015 from its end - 2014 level due to weakness in consumer prices caused by the effects of lower energy, telecoms and other prices in the housing sector. However, with the labour market tightening, the effect is likely to disappear in January 2016.

"We expect headline inflation to have accelerated to 2.85% yoy (0.39% mom) in the first biweekly report of this year as the effect of telecoms-led lower housing inflation likely petered out in December" - Societe Generale


Economic growth, inflation and pressure on the MXN driven by continued Fed tightening, provides Bank of Mexico ample scope to continue to normalise the policy rate in 2016. Non - core inflation is expected to remain low on subdued energy price inflation which is seen as a key downside risk to headline inflation.

"We expect headline and core inflation to average 3.5% and 3.2% respectively in 2016" - Societe Generale