Mexico’s annual inflation declined in May, however, it remained well above the central bank’s target range, heightening bets that the benchmark interest rate will continue at its current level for the rest of the year.
The national consumer price index (INPC) had a rise of 5.89%, after soaring in April to 6.08%, a figure not seen since the end of 2017, according to figures released on Wednesday by the National Institute of Statistics and Geography (INEGI).
The market projected a rate of 5.86% in the fifth month of the year.
“The greatest inflationary pressures were concentrated in the underlying component, that is, in core inflation on which monetary policy is effective,” said Gabriela Siller, director of economic-financial analysis at Banco Base.
Core inflation was at an annual rate of 4.37% and a monthly rate of 0.53%, the highest for the same month since 1999, when it was 0.97%. In the interior, increases were observed in merchandise prices (0.62% monthly and 5.76% annually), mainly in food merchandise (0.81% monthly and 5.49% annually), Siller explained.
The prices of non-food materials and other services continue to rise. “Both elements suggest the presence of supply shocks and pressures linked to the reopening of the economy. If these do not yield soon, additional upward revisions in inflation expectations for the end of the year will be on the way, ”anticipated Jessica Roldán Peña, chief economist at Finamex Casa de Bolsa.
According to the data, lower electricity rates due to summer subsidies in the north of the country and a drop in domestic gas prices helped to slow down inflation, which according to authorities should continue to show a downward trend to close the year around 4.8%.
Banco de México (Banxico), which has a permanent inflation target of 3% plus / minus one percentage point, has avoided moving the key rate in its last two monetary policy meetings, citing high levels of consumer prices.
Only in May, the general price index registered a growth of 0.20%, while core inflation, considered a better parameter to measure the trajectory of prices because it eliminates high volatility items, was 0.53%.
