Mexican consumer-price inflation held at an eight-year high in May, supporting expectations that the Bank of Mexico will continue raising interest rates this month.
The consumer-price index fell 0.12% in May as summertime subsidies on residential electricity rates offset price increases in food and other goods, the National Statistics Institute said Thursday.
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But the annual rate rose to 6.16% from 5.82% at the end of April, its highest rate since early 2009.
Core CPI, which excludes energy and fresh fruit and vegetables, rose 0.28% in May and was up 4.78% in the past 12 months. The core index also excludes government-controlled tariffs such as bus fares, which were raised in Mexico City to compensate for the big jump in gasoline prices at the start of the year.
The rise in the inflation rate has prompted the Bank of Mexico to more than double its overnight interest rate since December 2015, as it seeks to keep the impact of higher fuel costs and the depreciation of the Mexican peso from affecting medium and long-term inflation expectations.
Central Bank Gov. Agustín Carstens said last week that the rate increases, which began while inflation was still below the central bank's 3% target, have helped keep inflation in check and to hold down expectations, and insisted that inflation isn't out of control.
"If we hadn't done anything it's likely we'd have inflation close to 8% and inflation really would have been unanchored," he said.
The central bank expects the annual rate to remain well above the 2%-4% target band this year, but that it will begin to ease by year-end and return toward the target in 2018.
The bank raised rates for a sixth consecutive meeting in May, and is widely expected to raise the rate by another quarter percentage point to 7% on June 22.
Several board members said the rate-raising cycle could be approaching an end when they agreed unanimously last month to raise rates. The median estimate of banks surveyed this week by Citibanamex sees the overnight rate ending this year at 7.25%.
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(END) Dow Jones Newswires
June 08, 2017 10:12 ET (14:12 GMT)