Mexico inflation hits new eight-year high

MEXICO CITY: Mexico’s inflation rate hit a new eight-year high in July, official data showed, but the surge was expected to ease this year as jitters over US trade ructions fade. Consumer prices rose 6.4 per cent from the same month last year, the National Statistics Institute said.

It was the highest rate since December 2008, when the international financial crisis had just broken out. The July rise was driven by rises in food prices and the costs of summer holidays, the institute said.

Higher energy prices and lingering uncertainty over Mexico’s key trade ties with the United States have driven up its consumer prices over recent months. Mexico’s central bank had previously said the rise was partly driven by a weakened peso.

That was a lingering effect of US President Donald Trump’s tough talk on overhauling Mexico’s vital trade relationship with its northern neighbour.

“Most signs continue to point to the headline rate easing towards the end of the year,” said analysts at consultancy Capital Economics in a note.

“In particular, the lagged impact of past falls in the peso on inflation should soon start to fade rapidly.”

US, Mexican and Canadian officials are scheduled to start talks in Washington next week on renegotiating the North American Free Trade Agreement at Trump’s demand.

To try to rein in inflation, Mexico’s central bank has been steadily raising interest rates. It has forecast that inflation will start to ease later this year. — AFP