Mexico Bi-Weekly CPI (Jul.)

The small fall in Mexico’s headline inflation to 5.8% y/y in the first half of July was mainly due to fuel inflation dropping back, while the core rate remained stubbornly high at 4.6% y/y. The central bank has now shown that it will act to clamp down on above-target inflation suggesting that another 25bp rate hike, to 4.50%, is likely at its next meeting in August.
Nikhil Sanghani Emerging Markets Economist
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Latin America Economics Weekly

Argentina’s PASO surprise, Pemex debt

The loss for Argentina’s ruling Peronists in the open primary (PASO) for mid-term legislative elections in November suggest that the political tides might be shifting and boosted local financial markets. But the country’s public debt problems are likely to re-surface before too long. Meanwhile, the news that Mexico’s government has purchased $7bn of foreign exchange from the central bank appears to be another step towards the state taking greater responsibility for Pemex’s debt problems.

17 September 2021

Latin America Economics Update

Is high inflation here to stay in Latin America?

Following a surge in inflation across the region this year, we think that headline rates are at, or close to, a peak in major Latin American economies. But strong underlying price pressures will prevent inflation from falling below central banks’ targets over the next year or so. Monetary tightening cycles therefore have a lot further to run across the region, especially compared to elsewhere in the emerging world.

15 September 2021

Latin America Economics Weekly

Brazil’s political crisis, Mexico’s austere budget

It’s been a rollercoaster week in Brazilian politics and financial markets and, while investors have breathed a small sigh of relief in the past day or so, we think that they will be put under further pressure as the 2022 election nears. Elsewhere, Mexico's austere 2022 budget unveiled this week suggests that fiscal policy will continue to do very little to support the economy, which reinforces our view that Mexico's recovery will underperform most of its regional peers.
CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.

10 September 2021

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Latin America Economics Update

Chile: start of a long but gradual tightening cycle

Chile’s central bank fired the starting gun on a gradual tightening cycle yesterday as it hiked its policy rate by 25bp, to 0.75%. While it signalled that monetary policy will remain accommodative over the next two years, we think that Chile’s strong economic recovery will prompt the central bank to raise the policy rate to its neutral level, at 3.25%, by the end of next year.

15 July 2021

Latin America Data Response

Mexico Industrial Production (May)

The small 0.1% m/m gain in Mexico’s industrial production in May came despite a concerning 0.7% m/m drop in manufacturing production as shortages continued to hamper the auto sector. While there are signs that supply disruptions may be easing, the manufacturing sector will probably continue to struggle as external demand from the US weakens over the coming quarters.

12 July 2021

Latin America Economics Weekly

Unpacking Banxico’s minutes, Sinovac success?

The fairly hawkish minutes to Banxico's last meeting, where it delivered a surprise 25bp hike, reaffirm our initial view that more tightening is in the pipeline. We now expect a further 125bp of hikes, to 5.50%, by Q1 2022 (previously 5.25%). Otherwise, new virus cases are now falling sharply in Chile and Uruguay which may be encouraging evidence that their rapid vaccine rollouts, which primarily use the Sinovac jab, are helping to quash infections.

9 July 2021
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