(Reuters) – Mexico’s annual inflation rate slowed slightly more than expected in January, official data showed on Friday, after the central bank accelerated the pace of its interest rate cuts and signaled more monetary easing ahead.
In Latin America’s largest economy, the headline annual inflation rate hit 3.59% in January, statistics agency INEGI said, down from 4.21% the previous month and just below the 3.61% expected by economists polled by Reuters.
The improving inflation environment, with consumer price rises now within the Bank of Mexico’s 2% to 4% target range, and an economic contraction reported late last year have allowed policymakers to reduce borrowing costs in the country.
The central bank announced on Thursday a 50 basis-point cut to its benchmark interest rate to 9.5%, doubling the pace of its easing cycle and saying it could cut by a similar magnitude in future as inflation cools.
“This is a good inflation report, supporting Banxico’s dovish tilt yesterday,” Pantheon Macroeconomics’ chief Latin America economist Andres Abadia said.
“Inflation in Mexico hit cyclical lows recently, thanks in large part to subdued core pressures, giving Banxico some space to start normalizing monetary policy. But the Mexican peso sell-off in Q4 remains a near-term risk to price stability.”
In January alone, according to INEGI, consumer prices were up 0.29%, slowing from the 0.38% rise seen in December. Economists in the Reuters poll expected a 0.31% increase.
The core index, which strips out some volatile food and energy prices, rose 0.41% during the month and 3.66% on an annual basis. Market forecasts were at 0.45% and 3.70%, respectively.
(Reporting by Gabriel Araujo; Editing by Hugh Lawson)
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