Mexico: Inflation rate in Mexico climbs to 16-year high in 2017

Mexico’s annual inflation rate reached a 16 ½ year high in 2017. This has increased pressure on the central bank and its new leadership to come up with an effective plan to tackle the problem, following the decision to raise interest rates in December 2017.

According to the National Statistics Agency, the year to December saw annual inflation increase to 6.77%, a level not seen since May 2001. Inflation soared following the liberalisation of gasoline prices at the start of last year.

Mexico’s central bank is expected to increase interest rates further at its next monetary policy meeting in February. Mexico’s economy has entered a challenging period amid a volatile peso, deteriorating inflation expectations, risks associated with uncertain future of the NAFTA and a presidential election later this year.

The board of Mexico’s central bank now believes that its inflation target of 3% will be reached later than previously expected. Consumer sentiment reflects the challenging economic outlook, with RFi Group data indicating that almost two thirds (64%) of banked consumers in Mexico are very concerned about the effects inflation will have on them over the next 12 months.

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