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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 Update

Banxico to take its foot off the brakes

Mexico’s central bank (Banxico) hiked interest rates by 75bp, to 8.50%, for a second consecutive meeting yesterday but, amid mounting evidence that the economy is struggling and with inflation close to a peak, we think that the pace of tightening will slow from here. Our forecast is for the policy rate to reach 10.00% by year-end, which is a touch more hawkish than investors anticipate.

12 August 2022

Latin America Data Response

Mexico Industrial Production (Jun.)

Mexico’s industrial sector posted sluggish growth of just 0.1% m/m in June and the data suggest that the first estimate of Q2 GDP growth may be revised down. The backdrop of weakness in the US means that we expect Mexican industrial activity to stay soft over the rest of this year. But that is unlikely to deter Banxico from delivering further monetary tightening, including another 75bp hike, to 8.50%, later today.

11 August 2022

Latin America Data Response

Brazil IPCA (Jul. 2022)

The sharp fall in Brazilian inflation to 10.1% y/y in July from 11.9% y/y in June was mainly a result of tax cuts on energy; inflation in most other price categories remains extremely strong. Even so, at the margin, this data release increases the likelihood that the central bank will keep interest rates unchanged (rather than opt for a final 25bp hike) at its next meeting in September.

9 August 2022

More from Nikhil Sanghani

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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