Mexico’s annual inflation eases in December, supporting additional fee cuts

By Natalia Siniawski

(Reuters) -Mexico’s headline inflation fee eased greater than anticipated in December, fueling bets that the central financial institution will preserve chopping its benchmark rate of interest regardless of an uptick within the core shopper worth index.

Annual headline inflation in Latin America’s second-largest financial system hit 4.21% final month, INEGI information confirmed, under the 4.28% anticipated by economists in a Reuters ballot and down from the November determine of 4.55%.

“Excellent news,” central financial institution board member Jonathan Heath wrote in a put up on X, “since that is the primary time (inflation) comes under the 4.26% logged in October 2023.”

In the meantime the intently watched core shopper worth index, which excludes unstable vitality and meals costs, accelerated to three.65% within the 12 months by December from 3.58% the earlier month. Economists anticipated it to return in at 3.62%.

Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, mentioned the uptick in core inflation seems short-term and pointed to a drop in non-core inflation, helped by falling meals costs as a consequence of favorable climate, as a key issue driving the headline decline.

Final month the Mexican central financial institution delivered a 25-basis-point reduce to its benchmark rate of interest, its fifth in 2024, bringing the speed right down to 10.00%.

Minutes from the assembly, launched afterward Thursday, confirmed most board members had been open to contemplating bigger fee cuts going ahead.

However December’s inflation information might diminish that prospect, analysts warned.

“The report helps one other 25-basis-point fee reduce in February however cautioned that sticky core companies inflation and exterior dangers, similar to U.S. coverage uncertainty, could lead Banxico to stay cautious in accelerating fee cuts,” mentioned Kimberley Sperrfechter, rising markets economist at Capital Economics.