🇲🇽❗️Cable FX Macro Weekly Note: Mexico Aug. Consumer Prices

**As seen in Risk In The Week report 09/01/23, subscribe at cablefxm.co.uk/reports

Mexico consumer prices slowed to 4.79% Y/y from the prior 5.06%, the decline was in line with market expectations. The core metric came a bit softer than the consensus at 6.64% Y/y, however, the figure rose at the fastest monthly rate since April. On the month, food prices accelerated faster than the prior at 0.38%, and services prices posted the fastest monthly pace since March at 0.49%. Looking at the basket’s volatile items, energy prices posted a fifth consecutive month of declines, however, the deflationary pace was much slower than what we have seen over the prior months. Livestock prices declined by 0.97% while fruit and vegetables jumped by a staggering 5.5% on the month. Following these developments, we have seen a recent easing in inflation expectations, and some desks have started to pencil the start of Banxico’s easing cycle. Analysts at Société Générale noted that the Mexican economy has impressed the desk as it remains resilient, they noted that this will lead to Banxico keeping an upside inflation risk bias. SocGen does not expect Banxico to start slashing rates until core inflation has subsided meaningfully. Scotiabank noted that inflation in Mexico is now at the lowest in 28 months, they said to expect the slowdown to continue and warned that the core figure could remain sticky. Scotiabank reminded us that services prices have posted increments above 5.0% over the last 12 months. Banxico currently sees inflation rising by 5.52% in 2023 before slowing to 4.0% next year, economists surveyed by the central bank expect prices at 4.66% in 2023.