Monday, 23 October, 2017

Mexico raises key interest rate to 7 pct to combat inflation

Reuters Reuters
Ron Matthews | 24 June, 2017, 00:08

The central bank has now raised interest rates six times since Donald Trump won the United States presidential election in November, plunging the Mexican economy into uncertainty because of his vows to overhaul the North American Free Trade Agreement (NAFTA).

Gasoline prices declined in the month with the year-over-year increase slipping to 6.8 per cent from as high as 23 per cent in February.

The three measures of core inflation - which aim to get a better read on underlying price pressures in the economy - ranged from 1.2% to 1.5%.

Meanwhile, the average rate of core inflation, based on three gauges used by the Bank of Canada, slowed for a third straight month, to hit 1.3% in May.

The all-items consumer-price index in May rose 1.3% from a year earlier, Statistics Canada said Friday, following a 1.6% advance in the previous month.

"Canada's inflation rate is now not only well below Britain and the USA, but it is now also lower than that in China and the European Union".

Vehicle and parts dealer sales fell 1.0 percent following a solid increase in March as consumers bought fewer new cars.

Food prices also started to head back up, rising 0.3 per cent on month to month basis and now are just 0.1 per cent below year-ago levels.

Gasoline, however, remained one of the biggest upward contributors to inflation last month despite the weakened price growth.

Statistics Canada says the May inflation rate was also lower than April's reading of 1.6 per cent because prices declined in categories such as electricity, bakery products and Internet access services.

The result was softer than economists expected and lower than April's reading of 1.6 per cent, prompting some to predict it could slow the Bank of Canada's move toward an interest rate hike.

Last month's 5.5 per cent decline in electricity was one of the biggest downward contributors and recent changes in Ontario's hydro rates appear to have had an impact on the national number.

"The market thinks that the inflation peak is near and that Banxico will end its cycle this Thursday", Finamex analyst Guillermo Aboumrad said in a note to clients.

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