Consumer inflation continues at twice the target range of Banco de México (Banxico). In October it registered three consecutive months accelerating, with which it reached its highest level since the end of 2017, according to the information released by the National Institute of Statistics and Geography (Inegi).
In the tenth month of the year, the National Consumer Price Index (INPC) advanced 0.84% monthly, the highest advance for October since 1998, when prices increased 1.43 percent.
In annual comparison, inflation stood at 6.24%, the highest level registered for any month since December 2017, when prices to consumers increased 6.77 percent.
With the October result, they add up to eight months in which inflation is above Banxico’s target of 3% +/- 1 percentage point and it is expected that by the end of the year due to the persistence of pressures, inflation will continue outside the objective.
Given the outlook, Banxico is expected to announce a new hike in its reference rate at its monetary policy meeting this Thursday.
“We anticipate that inflation will close the year at 6.7% and that it will return to the tolerance margin of Banxico until the third quarter of 2022. The risks for the variable remain high, as the rise in infections in some parts of the world and the possibility of an energy crisis can make supply shocks take longer to dissolve. We estimate that Banxico will announce another increase in the target rate this week, “said Alejandro Saldaña, Deputy Director of Economic Analysis at Ve por Más (Bx +).
Widespread pressure
Within the Inegi report, it was observed that the pressures for annual inflation occurred both in the core and non-core index.
In the case of underlying inflation, which eliminates from its calculation the goods and services with more volatile prices and is the one that the central bank considers as a reference for its decisions, it was located at 5.19 percent.
“Attention to the underlying index is capital, since it is the fundamental determinant of the general advance of prices in the medium term and in October the result of 0.49% per month is more than double the historical average of the last 10 years for the same month, ”said Marcos Daniel Arias, an analyst at Monex financial group.
And he specified that annual core inflation stands at 5.19% “and we think that it will reach its peak in the second half of November with a level close to 5.80%, which would make it the highest in 20 years.”
Within its components, merchandise – the greatest pressure within the index in recent months – showed a price increase of 6.58% in annual comparison, while services became more expensive by 3.64 percent.
Non-core inflation, for its part, presented an annual rate of 9.47 percent. Within it, agricultural products increased their price by 9.02%, while energy and tariffs authorized by the government increased by 9.82 percent.
“Non-core inflation seems to stabilize around 9.00%, a level that will maintain constant pressures until the base comparison effect dissipates in the second quarter of 2023,” said the Monex analyst.
Electricity and LP gas impact pockets
Compared to September of this year, the increases in electricity and LP gas were the ones that had the greatest impact on general inflation in October.
In the case of electricity, from September to October its price increased 18.80% due to the end of the subsidy that is granted in some states in the summer. LP gas, meanwhile, became 8.20% more expensive per month despite the price control implemented by the federal government.
Other increases that impacted general inflation were those of onion, with 19.33%; the egg, with 4.51%, and the green tomato, with 25.55 percent.
Reference-www.eleconomista.com.mx