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INFLATION AT 21-YEAR HIGH IN MEXICO, CENTRAL BANK RAISING RATES

INFLATION AT 21-YEAR HIGH IN MEXICO, CENTRAL BANK RAISING RATES
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Avellon Williams

MEXICO CITY- Inflation in Mexico rose to its highest level since January 2001 in April, official data showed on Monday, possibly prompting the central bank to raise the key rate this week.

National statistics agency INEGI reported that consumer prices rose 7.68% in the year through April and by 0.54% in the month alone.

/Image, ST/

The rate is still well above the Bank of Mexico’s target of 3% plus or minus one percentage point, and compares to forecasts of 7.72%, according to a Reuters poll.

As inflation has risen, the central bank has increased the benchmark interest rate by 250 basis points to 6.50% in the last seven meetings of its monetary policy committee.

According to Nikhil Sanghani, an emerging markets economist at Capital Economics, “Ongoing inflation risks, alongside the more hawkish U.S. Fed, will put pressure on Banxico to continue its tightening cycle.” 

In the coming week, Sanghani expects Banxico to raise its key rate by 50 basis points to 7.0%.

The closely-watched core index rose 0.78% during the month and surged 7.22% in the year through April, which strips out volatile food and energy prices.

Mexico’s President, Andres Manuel Lopez Obrador /Image, AJR/

President Andres Manuel Lopez Obrador said on Monday that he expected inflation to ease, and that an end to Russia’s war in Ukraine would go a long way in helping to moderate inflationary pressures.

“The most important thing would be for a peace agreement to be reached between Russia and Ukraine. That would help a lot because that is what precipitated the economic crisis,” Lopez Obrador said in a regular news conference, adding that spiraling inflation was a “global phenomenon.”

Food and energy prices worldwide have increased as a result of the Ukrainian conflict.

/Image, RN/

Last week, the Mexican government announced it would increase the production of staple foods such as corn, rice, and beans to control consumer price inflation.

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Avellon Williams

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