Central Bank Reports Inflation at 7.17% in January-June

Article excerpt

The Mexican economy registered accumulated inflation of only 7.17% for the first half of 1999 because of the strength of the Mexican peso and the tight monetary policies adopted by the Banco de Mexico (central bank). The central bank said the stability of the peso in the past few months was a key factor in keeping down the inflation rate. The Mexican currency, which had fallen to as low as 10.06 pesos per US$1.00 at the beginning of February, had strengthened steadily to reach 9.34 pesos per US$1.00 as of July 14.

The consumer price index (Indice Nacional de Precios al Consumidor, INPC) for June was reported at 0.66%, the lowest rate for this month in the past five years. The index for the basket of basic consumer products was reported at 0.59% in June, lower than the INPC. However, the accumulated rate for the index of basic consumer products for January-June was 7.6%, or almost half-a- percentage-point higher than the accumulated-inflation rate.

Raul Feliz, a specialist at the Centro de Investigacion y Docencia Economica (CIDE), said the price of agricultural products has remained stable in the first half of the year, which has contributed to a stable cost for consumer products.

But Luis Villalpando, the central bank's director of economic information, said the basic basket of goods does not reflect all costs borne by lower-income Mexicans, such as public transportation. "An increase in the cost of a subway ticket will have a greater impact on low-income families than on those whose earnings exceed the equivalent of six minimum wages," said Villalpando.

Still, the relatively low inflation rate for January-June increases the chances that President Ernesto Zedillo's administration will meet its target of 13% annual inflation for 1999.

Some economists said prospects for low inflation in the second half of the year are enhanced by reduced costs of raw materials and other items used by the manufacturing sector. …