MEXICO CITY: Mexico’s annual inflation accelerated in September to nearly the central bank’s 3 percent target level, just days after its governor warned there could be higher interest rates if inflation “takes off” beyond that goal. Consumer prices rose 2.97 percent in the year through September, the national statistics agency said on Friday, above a 2.91 percent forecast from a Reuters poll. It is the steepest annual price rise since April 2015. The biggest driver of inflation was volatile agricultural prices.
The central bank hiked interest rates in late September to stem risks that a weak peso could fan inflation. The peso has been battered this year against the U.S. dollar, in part because of fears that Republican nominee Donald Trump could win the Nov. 8 U.S. presidential election. On Tuesday, Central Bank Governor Agustin Carstens said that it was important annual inflation did not “take off” beyond 3 percent or that could imply higher interest rates. The core price index, which strips out some volatile food and energy prices, rose at an annual rate of 3.07 percent.
Goldman Sachs economist Alberto Ramos said that core goods inflation, which rose at an annual rate of 3.92 percent, reflected the depreciation of the peso.”This is a sign of pass-through pressures from currency weakness, which may be intensifying at the margin,” Ramos said in a note to investors. The peso has fallen more than 11 percent this year against the dollar. The bank targets inflation of 3 percent with a one percentage point tolerance zone on either side. During the month of September, consumer prices rose 0.61 percent. The core index rose 0.48 percent in that month.
