Mexican CPI edges lower in August, despite peso weakness

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Sharecast News | 08 Sep, 2016

Updated : 17:46

Headline inflation was on the rise in Mexico, but stable core prices meant the central bank's neutral stance was justified in the near-term.

Consumer prices advanced by 0.3% month-on-month in August, as expected, yet the year-on-year rate of change was steady at 2.7%.

Economists had forecast an annualised pace of price gains of 2.8%.

Core prices rose 0.2% over the month, but remained at 3.0% in annual terms, for a fourth consecutive month, benefiting from recent stability in the country's exchange rate.

Andres Abadia, senior economist at Pantheon Macroeconomics, described price pressures as "modest", despite the upwards pressure from energy prices, which pushed non-core prices up by 0.6%.

Indeed, inflation remained low despite past weakening in the Mexican peso, and headline inflation was likely to remain near the central bank's target of 3% in the fourth quarter of 2016 and in early 2017, Abadia said.

"This supports Banxico's neutral stance in the near term. The current account deficit, fiscal policy and the Fed's actions will remain the key factors for monetary policy ahead."

As of 1508 BST the US dollar was 0.80% higher to 18.5270.

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