Mexico Early-January Prices Exceed Market Forecasts, Rate Hikes Expected

Mexico's headline inflation accelerated and exceeded expectations in early January, data from the national statistics agency showed on Tuesday, marking the first monthly pickup since September as markets brace for fresh interest rate hikes ahead, Reuters reported. Annual headline inflation in the first half of the month reached 7.94%, beating both the 7.77% recorded in the month of December and economists' forecasts of 7.86%, though still below the two-decade high of 8.70% registered in August and September. Meanwhile the core index, which strips out some volatile food and energy prices, hit 8.45% on an annual basis, back on the rise after showing some relief in December. It also exceeded forecasts of 8.34%. That means annual inflation remains far above the Bank of Mexico's target rate of 3%, plus or minus one percentage point. In an effort to tame rising prices, the central bank has increased its key lending rate by 650 basis points to 10.50% during the current hiking cycle, which began in June 2021. Banxico, as the central bank is known, is considering another interest rate hike at its next monetary policy meeting on Feb. 9, according to the minutes of its last board meeting - a move markets already anticipate, including a potential higher-than-expected hike. Read more.