Mexican Inflation Picks Up in Early February on Energy Costs

MEXICO CITY--Mexican consumer prices rose moderately in the first half of February with increases in energy costs partially offset by lower fresh food prices.

The consumer price index rose 0.23% in the two-week period, enough to push the 12-month inflation rate up to 3.84% from 3.54% at the end of January, according to official data. Core CPI, which excludes energy and agricultural products, rose 0.22% in the first half of February, and was also up 3.84% from a year earlier.

Energy prices, including gasoline and propane gas, rose 1.28% from January, while fresh fruit and vegetable prices fell 2.4%.

The Bank of Mexico cut its overnight interest-rate target on Feb. 11 to 4% from 4.25%, and is widely expected to follow that with an additional quarter-percentage-point reduction at its meeting on March 25.

Although February's interest-rate cut was expected given signs that the economic recovery lost momentum toward the end of 2020, analysts were surprised that the decision was made unanimously by the central bank's five-member board.

"We see scope for a further 25 [basis point] cut in March, when inflation should be sub-4%," analysts with UBS said in a report. "After that, with inflation due to increase well above 4% for much of the second quarter, the chance to ease further may not reopen until the second half of the year, at which point the world may look very different."

The central bank paused in its interest rate-cutting cycle in late 2020 after the inflation rate had moved above 4%. In resuming rate cuts last month, the bank said it expects the annual inflation rate to rise in the second quarter, then gradually ease toward its 3% target in the second half of the year.

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


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  02-24-21 0753ET
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