Mexican inflation likely to have accelerated to 2.74 pct in July

The rise in bi-weekly inflation in Mexico to 2.72 percent year-on-year from 2.53 percent in July is mainly due to the uptick in non-core government approved energy prices, said Societe Generale in a research report. Thus, the non-core inflation, overall, accelerated to 1.86 percent year-on-year from 1.12 percent in the last two weeks of June. The full-month inflation is expected to have accelerated to 2.74 percent year-on-year in July, according to Societe Generale.

Meanwhile, full-month core inflation is expected to have reached Bank of Mexico’s target at 3 percent year-on-year. The headline and core inflation in Mexico is likely to surpass the central bank’s target in the fourth quarter of 2016, added Societe Generale.

Core inflation in Mexico has been accelerating steadily as inflation in the core-merchandise segment continued to rise, probably due to an effect of peso depreciation. For the last few months, inflation has been hovering around the 2.5 percent to 2.6 percent mark, a bit higher than the 2.1 percent seen during the end of 2015.

Inflation has remained below the Bank of Mexico’s target level in 2016. The weakness in headline inflation is mainly because of declining transport inflation, whereas in the core category, dwelling inflation has continued to be low and has kept the overall prices low in spite of the peso-led increase in certain tradable segments.