Mexico's Inflation Accelerates to 16-Year High in Early December

By Juan Montes Features Dow Jones Newswires

Mexico's inflation accelerated to a 16-year high in early December, coming in slightly above expectations and opening the door for an additional rate increase early next year.

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The Bank of Mexico raised last week the overnight interest rate target by a quarter percentage point to 7.25%, as inflation more than doubles the bank's 3% target. Most economists expect the central bank to hike rates again in its February policy meeting.

The consumer-price index rose 0.44% in the first two weeks of December, pushing the annual rate up to 6.69% from 6.63% at the end of November, the national statistics agency said Thursday. Analysts were expecting consumer prices to raise 0.40%.

Annual inflation hit a level not seen since May 2001, when it was at 6.95%.

Core CPI, which excludes energy and fresh fruit and vegetables, rose 0.43% in early December, with the annual rate unchanged at 4.90%.

In its latest policy decision, the Bank of Mexico said the inflation outlook has turned "more complex" and that inflation will be "moderately" above the 3% at least for the next two years.

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Inflation surged early this year, fueled by a jump in gasoline prices ordered by the government and the persistent weakness of the peso, which in turn made imports more expensive.

Services, which are more vulnerable to the peso depreciation, contributed the most to the rise in inflation in the first half of December. Touristic services and aerial transportation, as Christmas festivities neared, jumped 12% and 41% respectively.

Energy and agricultural prices also rose significantly. Energy prices were 17.5% higher than a year before, while fruits and vegetables jumped 16%.

Write to Juan Montes at juan.montes@wsj.com

(END) Dow Jones Newswires

December 21, 2017 09:54 ET (14:54 GMT)