Mexican Inflation Rose Further in August

By Anthony Harrup

MEXICO CITY--Inflation in Mexico picked up pace in August on higher prices of core goods and fresh produce, moving further above the central bank's 3% target.

The consumer price index rose 0.39% last month, moving the 12-month inflation rate up to 4.05% from 3.62% in July, the National Statistics Institute said Wednesday.

Core CPI, which excludes energy and agricultural products, rose 0.32% in August and was up 3.97% from a year earlier.

The rise in inflation from a low of 2.15% in April has moved the annual rate back above the Bank of Mexico's 3% target. The cost of services has remained in check as restrictions imposed because of the coronavirus have limited demand.

In its quarterly report last month, the central bank raised its projections for the remainder of this year and early 2021, but still expects inflation to return to the target in the fourth quarter of next year.

The central bank cut its overnight interest-rate target to a four-year low 4.5% in August, and is widely expected to lower the rate further given the sharp contraction in economic output.

Gross domestic product fell 18.7% from a year earlier in the second quarter when many businesses were closed to slow the spread of the coronavirus, and is estimated to see a contraction close to 10% for the full year.

The sharpest price increases in August were seen in core goods, which are among those affected by the depreciation this year of the Mexican peso against the U.S. dollar, and in fresh fruit and vegetables, especially tomatoes and limes.

Write to Anthony Harrup at [e-mail]