Mexico CPI decreased 0.45% 2w/2w in the first fortnight of April, owing to the seasonal adjustment of electricity tariffs and a reduction in tourism services. The surprise came from additional price declines in perishable food prices. Core inflation was 0.03% 2w/2w.
"This print puts downward pressure on our 2.8% y/y forecast for year-end, as these deflation pressures will likely not be compensated in the second half of the month, reducing the probability of -0.06% m/m deflation in April as a whole. We will wait to confirm this before making an adjustment. But so far, this seems to confirm that inflation will remain subdue." notes Barclays in a report
Durable goods inflation has accelerated to 2.0% y/y, with room to absorb any additional pass-through pressures from the MXN depreciation. On the other hand, services inflation is 1.9%, basically reflecting the reduction in telecommunications tariffs and probably weak demand. In that sense, this core inflation will likely not reach close to 3% until Jan 2016.
"Data makes us think that if the US Fed does not move the funds rate, Banxico will likely not hike until Dec. Our base case continues to be an October hike, consistent with the Fed's moving in Sept. Finally, this report seems to confirm that the board will remain on hold at the April 30 meeting, allowing the MXN to continue reflecting global macro conditions." adds Barclays
