- A minor inflation beat and a slight increase in inflation expectations leave our 75bps Banxico hike forecast unchanged.
Headline inflation in Mexico exceeded economists’ expectations again in data for the first fortnight of September published by INEGI this morning (chart 1), edging lower from 8.77% to 8.76% y/y (8.71% expected).
On the other hand, core inflation came in only marginally above consensus (charts 2 and 3), accelerating from 8.13% to 8.27% and against 8.26% y/y expected, on the back of increases of 10.75% and 5.43% in merchandises and services, respectively. Non-core inflation decelerated somewhat, from 10.70% to 10.22% y/y with the energy prices reading slowing from 7.77% to 6.64% y/y and food from 15.30% to 15.23%.
On a bi-weekly basis, headline inflation accelerated from 0.32% 2w/2w to 0.41%, above the 0.38% expected by analysts. The core component also rose, from 0.32% to 0.44% (vs. 0.42% of consensus), with merchandise inflation accelerating to 0.50%, while services prices showed an increase of 0.36%. Inflation in the non-core CPI basket moderated to 0.32% from 0.34% 2w/2w, owing to a slower pace in food prices growth from 1.25% to 0.86%, and a smaller decrease in energy of -0.25% (-0.75% in the previous release).
Yesterday, the country’s consumer protection agency Profeco indicated that in the coming days president López Obrador will release an update to the anti-inflation plan—which has contributed to more muted energy prices increases, with almost no impact on the price of other goods.
Nevertheless, inflation expectations remain elevated. End-2022 inflation forecasts averaged 8.36% y/y (from 8.24% previously) in the Citibanamex survey results published yesterday, though they remained virtually unchanged for end-2023 at 4.74% (from 4.71%).
We maintain our outlook for a 75bps hike at Banxico’s meeting next Thursday, in line with most analysts.
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