Mexico’s inflation reaches highest level in 8 years during May

12 June, 2017

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Mexico's annual inflation rate rose in May at its highest level since April 2009, according to official data.

Prices hiked last month at an annual rate of 6.16%, despite the consumer-price index fell 0.12% in May due to summertime subsidies on residential electricity rates, a measure that usually offsets price increases in food and other goods.

Mexico's central bank says the rise is being driven by higher prices in fuel and agriculture, as well as a weak peso, which has made imports more expensive.

Inflation has quickened in Mexico since the beginning of the year, when the government liberalized the price of gasoline and diesel as part of sweeping energy reforms.

Inflation had also hit an eight-year high in April, when it came in at 5.82 percent. The rate has now stood above the central bank's target ceiling of 4% for five consecutive months.

The bank has raised its key interest rate nine times since December 2015 in a bid to control inflation. It now stands at 6.75%, which is also a more than eight-year high.

Central Bank Gov. Agustin Carstens said last week that the rate increases, which began while inflation was still below the central bank's 3% target, have helped keep inflation in check and to hold down expectations, and insisted that inflation isn't out of control.

"If we hadn't done anything it's likely we'd have inflation close to 8% and inflation really would have been unanchored," he said.

The central bank expects the annual rate to remain well above the 2%-4% target band this year, but that it will begin to ease by year-end and return toward the target in 2018.

The bank raised rates for a sixth consecutive meeting in May, and is widely expected to raise the rate by another quarter percentage point to 7% on June 22.

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