- Mexico: Inflation in the first half of April accelerated again and we are revising our inflation forecasts for 2022 and 2023
MEXICO: INFLATION IN THE FIRST HALF OF APRIL ACCELERATED AGAIN AND WE ARE REVISING OUR INFLATION FORECASTS FOR 2022 AND 2023
According to INEGI, headline inflation for the first half of April came in at 7.72% y/y (chart 1), accelerating from 7.62% y/y in the second half of March and above the market expectation of 7.63% y/y. Core inflation also increased, to 7.16% y/y (versus 7.10% consensus), up from 6.88% y/y previously (chart 2). By components, merchandise goods prices increased 9.13% y/y, the highest level since 2000, while services prices rose 4.94% y/y. Non-core inflation decelerated to 9.38% y/y from 9.80% y/y previously (chart 3), driven mainly by the fruits and vegetables component (17.26% y/y versus 20.59% y/y previously), while energy and tariffs moderated slightly to 5.10% y/y from 5.19% y/y.
On a biweekly sequential basis, inflation surprised the market coming in at 0.16% 2w/2w, as compared to expected (0.05% 2w/2w) and 0.59% 2w/2w previously. Core inflation maintained its trajectory, now at 0.44% 2w/2w from 0.40% 2w/2w in the last half of March. Non-core inflation declined -0.66% 2w/2w from 1.15% 2w2w, owing to a -2.39% drop in energy.
In line with the internal and external inflation pressures, we are revising our inflation forecast for 2022 and 2023: we expect headline inflation to be 5.90% y/y (5.50% y/y previously) at the end of 2022 and 4.28% y/y (4.10%) at end-2023. We are also revising our core inflation forecast to 5.46% y/y (5.20%) for 2022 and to 4.02% y/y (3.90%) for 2023. As inflation continues to exceed consensus, we maintain our call for another 50 basis points increase in the monetary policy rate in May. For now, we see the monetary policy rate at 8.25% by the end of 2022, subject to an adjustment in the future as upside risks remain.
—Luisa Valle & Miguel Saldaña
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