Mexico's inflation may inch up to 2.7%

Mexico CPI increased 0.37% m/m in September. This was the result of no inflation observed in the second half of the month, due to unexpected price reductions in perishables. 

However, core inflation increased 0.37% m/m, slightly higher than consensus expectation of 0.36%, as a result of a relative strong increase in core food goods in the second half of the month (0.19% 2w/2w), partially offset by almost zero inflation in services (0.03% 2w/2w). 

In annual terms, inflation declined to 2.5% from 2.6% in August, with core inflation accelerating to 2.4% y/y (from 2.3%).

"This report is consistent with our 2.5% year end forecast. We believe that core will continue inching up to 2.7% in December as some FX pass-through continues taking place. However, services inflation will likely stay very close to 2.2%, ruling out a contamination from this source to non-tradable prices. Banxico is unlikely to hike until June 2016 if aggregate demand side pressures are on the horizon", says Barclays.