Mexican Inflation Ended 2017 at Highest Level in 17 Years

MEXICO CITY – 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.

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)