- Mexico annual inflation slows to 3.55% in early June, below forecast
- Data eases pressures on the central bank to raise rates
- Capital Economics says Banxico likely to wait until near year-end before tightening cycle
- Core inflation remains above Banxico target despite slowdown
MEXICO CITY, June 24 (Reuters) - Mexico's annual inflation rate hit 3.55% in the first half of June, official data showed on Wednesday, landing below expectations and defusing pressures for a rate hike from the central bank.
Consumer prices in Latin America's second-largest economy eased from a prior reading of 4.11% in the first half of May, the national statistics agency said, and landed below expectations of economists polled by Reuters that had forecast it to come in at 3.77%.
Markets expect Banxico to keep its benchmark interest rate at 6.50% on Thursday, after its board members last month delivered a final rate cut, ending an extended easing cycle amid worries over mixed consumer price trends and a slowing economy.
The larger-than-expected fall in Mexican inflation "will further ease any pressure on Banxico to raise interest rates in the near term," Capital Economics analyst Kimberley Sperrfechter said in a note.
Despite the Fed's shift in the U.S. to a tightening monetary policy, and relatively stubborn underlying price pressures in Mexico, the central bank is expected to wait until near the end of the year to embark on a modest tightening cycle, she added.
STUBBORN CORE PRICES
The closely watched core inflation, an index that strips out highly volatile products, stood at 4.12%, from a prior 4.22% in the first half of May, and compared with a forecast of 4.14%.
Despite the slowdown, core inflation is still above the Bank of Mexico's permanent target of 3%, plus or minus 1 percentage point.
Month-on-month consumer prices fell 0.11% during the first half of June, compared with a slight 0.10% increase expected by economists in the poll, while the core price index climbed 0.19% in early June, below expectations of a 0.21% increase.
Reporting by Aida Pelaez-Fernandez and Ricardo Fiegueroa; Additional reporting by Noe Torres; Editing by Mark Porter
Source: Reuters