Mexico: Inflation ends 2015 at the lowest level on record

In December, consumer prices rose 0.41% over the previous month. The result was marginally below the 0.55% increase registered in November and overshot the 0.36% rise the market had expected. The National Statistics Institute (INEGI) reported that the monthly increase reflected higher fresh food prices, a seasonal increase in gasoline prices as well as an increase in prices for tourism services.

For this time, inflation ended well below the Central Bank’s target of 3.0%. Inflation fell to 2.1% in December (November: 2.2%), which also marked the lowest level on record.

The closely watched core consumer prices—which exclude volatile categories such as fresh food and energy—rose 0.31% in December over the previous month, which was up from November’s 0.04% increase. Core inflation inched up from 2.3% in November to 2.4% in December.

The Consensus view among analysts is that inflation will start to rise gradually in the coming months due to the fading of one-off effects related to the disappearance of long-distance tariffs and discounts on mobile phone tariffs implemented in November and December 2015. However, analysts consider that inflation will remain below the Central Bank’s target, at least until Q2 2016.

The Central Bank (Banxico) expects inflation to rise gradually through 2016 and converge on its inflation target of 3.0% at the end 2016. Panelists surveyed for this month’s LatinFocus Consensus Forecast expect inflation to end 2016 at 3.3%, which is down 0.1 percentage points over last month’s forecast. For 2017, the panel sees year-end inflation at 3.3%.