Mexico’s Inflation in June Touches 21-year High

On Thursday, official data showed that annual inflation in Mexico had accelerated in June and climbed to levels that had not been seen in the country since 2001. This leaves the central bank in the country with no choice, but to continue with its monetary tightening policy in order to rein in the galloping consumer prices.

Inflation numbers

There was a 7.99% increase in consumer prices in Mexico in the year to June, which was slightly higher than the predicted 7.95% increase. This was also significantly above the central bank’s inflation target of 3% and marked the highest level of inflation that the country has seen in 21 years. Back then, Mexico’s inflation for a 12-month period had reached 8.11%.

Due to the latest figures for inflation, the country’s central bank, which is called Banxico, is expected to continue hiking interest rates, after it had already done so by 75 basis points in the previous month. The bank had warned at that time that it would continue hiking at the same pace in order to tame inflation.

Since mid-2021, the Mexican central bank has been hiking its interest rates and has already recorded an increase of 375 basis points. Its next decision about its monetary policy will be made on August 11th.

Consumer prices data

Market analysts said that at this point, it remains certain that there would be yet another 75 basis points increase in the country, which would take the interest rate up to 8.5%. It seems likely that the interest rate by the end of the year would reach 9.5%.

There was a 0.84% increase in consumer prices last month, after figures were non-seasonally adjusted, which was higher than the 0.81% forecast. There was a 0.77% increase in the core inflation index, which does not include some volatile energy and food prices, and this was below the expected rise of 0.8%.

Minutes of the meeting

On Thursday, the minutes of the meeting of the Mexican central bank last month was also released. These minutes showed that the majority of the five-member board of the bank were agreed on the fact that expectations of inflation for this year and the next had significantly increased.

According to predictions from analysts, the rise in inflation will come to a stop by the end of the year, but they believe that it will continue to stick to its current high. Analysts said that they expected inflation to hit its peak between 7.5% and 8% in August or September and to stay at that level for the rest of the year.

The data was regarded as a bad end for this year’s second quarter, with the key issue being the high commodity prices that appear to be plaguing the world. But, analysts said that they did expect inflation to show a downward trend for the second half of 2022. This is because they expect the monetary policy tightening to take its toll on prices and the other measures of the government.