Mexican Inflation Reaches New High for the Year

By Anthony Harrup Features Dow Jones Newswires

Mexican consumer prices rose more than expected in the first half of August, pushing the annual inflation rate to a new multiyear high, the National Statistics Institute said Thursday.

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The consumer-price index rose 0.31% in the first two weeks of the month against expectations of a 0.21% increase, and the annual rate was 6.59% compared with 6.44% at the end of July. Core CPI, which excludes energy and fresh fruit and vegetables, rose 0.20% for an annual rate of 5.02% versus 4.94% in July.

Annual inflation this year has reached its highest level since mid-2001, and is slightly above the 6.56% reached in mid-December 2008 at the height of the global financial crisis. A jump in gasoline prices at the beginning of this year, and the effect on some prices of the peso's depreciation since late 2014, were the main causes of the increase.

The Bank of Mexico earlier this month left its overnight interest rate target at 7%, pausing after raising the rate at seven consecutive meetings. Although inflation is expected to stay above 6% in coming months, the annual rate appears to be reaching a peak, the bank said.

The central bank expects inflation to return to its 3% target at the end of 2018.

In the first half of August, a decline in the cost of tourism packages and airfares after the high season was offset by higher school fees as the fall term started at universities and high schools. Gasoline and propane gas prices rose, while electricity rates were lower.

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Volatile fresh fruit and vegetable prices rose 1.64% and were up more than 27% from a year earlier.

Transportation and food are the main causes of the higher cost of living, rising an annual 10.8% and 10.4%, respectively, from mid-August 2016.

Food items will take on greater weight in the consumer-price index under an update that will be used starting in August of 2018, the statistics institute said Wednesday. The update, based on more recent information on consumer spending habits, will raise the importance of goods in the core index while reducing the weight of services. It will also include greater geographical coverage.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

August 24, 2017 10:44 ET (14:44 GMT)