MEXICO CITY (Reuters) -Mexico’s headline inflation ended 2022 slightly below analysts’ expectations, while core inflation finally appeared to have peaked, data from the national statistics agency showed on Monday.
Annual headline inflation in December reached 7.82%, up moderately from 7.80% in November, but still below the record 8.70% reached in August and September.
Meanwhile the core index, which strips out some volatile food and energy prices, hit 8.35% on an annual basis in December, dropping from November’s 8.51%, and the first slowdown since its stubborn upwards cycle began.
Economists polled by Reuters had expected annual headline inflation to come in at 7.86% and core inflation at 8.36%.
Inflation has blown past the Bank of Mexico’s target rate of 3%, plus or minus one percentage point, prompting it to increase its key lending rate by 650 basis points to 10.50% during the current hiking cycle, which began in June 2021.
The central bank is now considering another interest rate hike at its next monetary policy meeting scheduled for Feb. 9, according to the minutes of its last board meeting.
Jason Tuvey, Senior Emerging Markets Economist at Capital Economists, said that the core index data showed progress, and expected the Bank of Mexico to slow the pace of its rate hikes at the next meeting.
“Policymakers at the central bank will have taken comfort from the fact that core price pressures are finally easing,” he said.
“We think that (the next rate hike) will be a smaller 25bp increase (to 10.75%), and that this will mark the end of the tightening cycle.”
On a monthly basis, core inflation was 0.65% in December.
Meanwhile, monthly headline inflation was 0.38% in the period, according to non-seasonally adjusted figures..
(Reporting by Isabel Woodford; Editing by Kevin Liffey)
