Mexico's core inflation may pick up in early 2016

Mexico's inflation is under control. Inflation dynamics have been positive amid the FX depreciation. In particular, the FX pass-through has been limited to some durables prices, suggesting that this is not a generalized and persistent phenomenon. 

"Core inflation might slightly pick up towards the beginning of 2016, basically due to an expected acceleration of core inflation in Q4 15. This performance should be short-lived, and core inflation will likely hover around 3% for the rest of 2016. Finally, some positive shocks is expected to continue to affect CPI, as additional reductions on mobile tariffs and lower gasoline prices are expected in January", argues Barclays.

The economy has been decelerating in H2 15, driven by a slowdown in the services activities. Aggregate demand should gradually recover during 2016, while the output gap will likely remain on negative terrain. In terms of the labor market, the unemployment rate should reach pre-crisis levels by the end of 2016, with real wages improving slowly. The slack in the economy will likely persist in 2016, added Barclays.