Inflation in Mexico soars to its highest level in more than two years

08/04/2021

Price hikes in Mexico accelerated in March to their highest level since late 2018, to stand above the central bank's official target, and driven mainly by increases in fuel prices. The consumer price index registered an increase of 4.67% at an annual rate, reported the National Institute of Geography and Statistics (Inegi).

This is the largest price spike since 4.83% in December 2018. Core inflation stood at 4.12%, also in line with market expectations. The Bank of Mexico kept its benchmark interest rate unchanged in March at 4%, citing an increase in expectations for year-end inflation. The agency has a permanent inflation target of 3% +/- one percentage point.

In March alone, consumer prices rose 0.83%, the strongest increase for a similar month since 1999 according to INEGI, while the core index advanced 0.54%. The items that most increased their prices during the third month were domestic LP gas, low octane gasoline, and foods such as eggs and corn tortillas.

Analysts recently commented to Expansión that inflation will exceed 5% in the short term, which threatens the national economy to face the problem of stagflation, which is defined by the Bank of Mexico as "the situation of an economy in which there is a reduction in the level of economic activity, accompanied by high and growing inflation".