Mexico’s prices rise at 4.66% yearly clip in November

Mexico’s consumer prices rose above expectations in December with increased holiday season-related spending keeping pressure on the central bank as it starts considering an interest rate cut in coming months.

Consumer prices rose 4.66% compared to the same period a year earlier, up from 4.32% in November, the national statistics institute reported Tuesday.

The increase was above the 4.57% median estimate of analysts in a Bloomberg survey. Core inflation, which strips out volatile items such as fuel, slowed to 5.09% from 5.3% in November — below economists’ 5.15% projection.

Mexico’s central bank began cautiously discussing the possibility of rate cuts in 2024, with board members insisting that any reductions should be gradual, the minutes of its December rate decision showed. The institution, known as Banxico has held its key rate at a record 11.25% for six straight meetings. It targets inflation at 3%, plus or minus one percentage point.

Last month, the board talked about the need for prudence when starting the easing process, with members calling for “fine-tuning” and “cautious” adjustments, according to the meeting minutes. While one policymaker mentioned the end of the first quarter or the second quarter of 2024 as possible start dates for easing, another cautioned that reductions might not come as soon as financial markets expect.

The U.S. Federal Reserve’s decision to consider cuts in 2024 opens the door for Banxico to follow suit. The Mexican bank maintained its forward guidance in its December decision, saying it would hold the current rate “for some time.”