MEXICO CITY (Reuters) -Mexican consumer prices rose 7.45% in the year through March, a level not reached since early 2001 and double the central bank’s target, data from the INEGI national statistics agency showed on Thursday, suggesting that more interest rate hikes are likely.
Consumer prices were also above the median forecast of analysts surveyed by Reuters, who projected inflation would rise to 7.36% in March, versus 7.28% in February.
Core inflation, which strips out some volatile food and energy items, increased 6.78% in the year through March, a level not hit since April 2001, the INEGI data showed.
The Bank of Mexico, or Banxico as the central bank is called, has a permanent headline inflation target of 3%, with a one-percentage-point tolerance range above and below that.
Headline and core inflation have “further to run in the near term as food and energy inflation edges higher. Broader price pressures will also remain strong, suggesting that Banxico’s tightening cycle will go further than most analysts expect,” said Nikhil Sanghani, Latin America economist at Capital Economics.
The Bank of Mexico raised its benchmark interest rate by 50 basis points last month, its seventh straight hike, citing tightening global monetary and financial conditions, and uncertainty and inflationary pressure linked to the war in Ukraine.
“Persistent inflation risks, alongside the more hawkish U.S. Fed, will put pressure on Banxico to continue tightening over the coming months,” said Sanghani.
He forecast another 50-basis-point rate hike at the bank’s next monetary policy meeting scheduled for May 12 and at least a further 150 basis points of tightening in this cycle to 8.50%.
Consumer prices rose 0.99% in March, according to non-seasonally adjusted figures, while the core index rose 0.72% during the month, according to INEGI data.
(Reporting by Anthony Esposito; editing by Jason Neely and Bernadette Baum)
