Mexican Inflation Ended 2017 at Highest Level in 17 Years

By Anthony HarrupFeaturesDow Jones Newswires

Mexican inflation accelerated in 2017 to its fastest rate in 17 years, led by higher food and energy costs that were affected by a weaker peso and an end to government controls on gasoline and other fuels.

The consumer-price index rose 0.59% in December, bringing the annual inflation rate to 6.77%, the National Statistics Institute said Tuesday. It was the highest rate since May 2001, and the most for a calendar year since 2000.

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Core CPI, which excludes energy and fresh fruit and vegetables, rose 0.42% in December and was up 4.87% in all of 2017, the highest full-year rate since 2008.

Peso depreciation against the U.S. dollar contributed to higher prices for manufactured goods and processed foods, and a sharp increase in gasoline and diesel prices in January 2017 as the government ended fuel subsidies in favor of a competitive market led to higher energy costs.

Fresh fruit and vegetable prices rose 18.6%, contributing to the 8.29% increase in overall food and beverages costs, while higher fuel prices prompted transport costs to rise by 11.8% for the full year.

The pickup in inflation to more than double the Bank of Mexico's 3% target led the central bank to increase interest rates to their highest level since 2009, ending the year with the overnight interest-rate target at 7.25%.

Inflation is expected to start easing in January as the impact of last year's gasoline price increases disappears from the 12-month window, but the central bank is still expected to increase interest rates by another quarter-percentage-point in February as it sees inflation taking longer than previously thought to get back on target.

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

(END) Dow Jones Newswires

January 09, 2018 10:07 ET (15:07 GMT)