Mexican inflation likely to accelerate towards average of 4.2 pct in Q4 2017, says Societe Generale

Mexico’s inflation has stayed below 6 percent since 2003 and below 5 percent since 2005 with the exception of the higher-commodity price-led sharp rise in 2008-2009. Furthermore, Mexico’s inflation has been on a downward path since 2009 on average and the underlying price pressure has been below the headline inflation most of the time since 2011, noted Societe Generale in a research report.

After declining sharply in 2015 on structural reforms, especially in the telecom sector, inflation in Mexico recovered to the target range of the Bank of Mexico towards the end of 2016, partially because of the considerable weakening of the Mexican peso. Moreover, the inflation is now heading towards the upper range of the target.

Mexican inflation is expected to accelerate towards an average of 4.2 percent in the fourth quarter of 2017 and then slightly moderate in 2018/2019. But given the continued pressure on the peso and the Pemex’s decision to hike gasoline prices by almost 20 percent, there are significant upside risks to the projections in the near term, added Societe Generale.