Mexican consumer prices rose 0.42% during the first half of August, pushing annual headline inflation to 8.62%, both slightly ahead of market expectations, data from the national INEGI statistics agency showed on Wednesday.
The closely watched core price index, which strips out some volatile food and energy prices, climbed 0.49% in early August. Annual core inflation stood at 7.97%.
The latest consumer price numbers likely reinforce bets that Banxico, as the Bank of Mexico is known, will again hike its benchmark interest rate in September as it struggles to bring inflation to its 3% target, plus or minus one percentage point.
“Both readings came in above our expectations and confirm that the descent in consumer prices projected for the second half will be more painful than originally expected,” JPMorgan economists said in a note, maintaining their call for a 50 basis-point hike next month.
Analysts polled by Reuters had forecast annual headline inflation to reach 8.52% during the first half of the month, on the back of an expected 0.35% increase in the period.
Banxico’s deputy governor, Jonathan Heath, noted that general inflation remained on an uptrend.
Gabriela Siller, an economist at Banco BASE, called the latest data “worrying” while foreseeing a stagflation scenario for Latin America’s second-largest economy.
“While in the U.S. inflation seems to be going down, in Mexico it keeps reaching new highs,” she said.
At the same time, Brazil – Latin America’s largest economy – on Wednesday reported consumer price deflation in the month to mid-August, benefiting from tax cuts on key products.
Banxico hiked its benchmark interest rate by three-quarters of a percentage point to a record 8.5% in August, mirroring the U.S. Federal Reserve’s most recent policy decision as Mexican inflation surged to an over two-decade high.
“Coupled with still rising inflation expectations and a hawkish Fed, (current inflation) will force Banxico to tighten over the next few meetings,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.