MEXICO CITY: Mexico’s central bank expects the inflation rate to rise to around 3 percent in 2016, up from a projected year-end rate of 2 percent in 2015.
“In 2016, as the favorable supply shocks that occurred in 2015 fade and taking into account the shift in relative prices stemming from the exchange rate depreciation, a gradual increase (in prices) is expected until a level close to 3 percent is reached,” the Bank of Mexico said.
The bank’s Board of Governors projected at its Dec. 17 meeting that both headline inflation and core inflation, which excludes volatile food and energy prices, would finish the year at close to 2 percent “due to the absence of price pressure from aggregate demand,” according to the minutes published Thursday.
The central bank also is forecasting that year-end inflation in 2017 will come in at around 3 percent.
The previous forecasts are subject to upside risks, including the possibility that Mexico’s currency may experience a greater depreciation relative to the dollar as a result of a new deterioration in global financial market conditions, it added.
That could cause, among other things, a rise in the prices of non-tradable goods.
“Downside risks for inflation include the possibility that the prices of some general-use inputs – such as telecommunications and energy services – could fall further, as well as the potential for a partial reversal of the depreciation that the peso underwent in previous months,” the Board of Governors said.
Mexico’s consumer price index rose 0.26 percent in the first half of December compared with the second half of November, bringing the annual inflation rate to a record low of 2 percent.
The country’s consumer price index hit record lows on several occasions in 2015, a result President Enrique Peña Nieto’s administration attributed to effective macroeconomic policy and to reforms undertaken to improve competition in sectors such as energy and telecommunications. EFE
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