Mexico inflation hits new seven-year high

 

Mexico's inflation rate hit a new seven-year high in March, official data showed Friday, adding to the case for more interest rate hikes by the central bank.

The annual inflation rate reached 5.35 percent last month, its third month above the central bank's target ceiling of four percent, according to national statistics institute INEGI.

Latin America's second-largest economy is facing instability unleashed by the arrival of US President Donald Trump, whose vows to build a border wall and overhaul Mexico's privileged trade relationship with the US are causing jitters.

The peso plunged when Trump took office in January, hitting record lows as investors dumped Mexican assets.

That in turn caused consumer prices to rise as imported goods became more expensive.

Adding to the inflationary pressure, President Enrique Pena Nieto's government raised gasoline prices by more than 20 percent as part of a sweeping energy reform.

Last month, the central bank raised its key interest rate to its highest level in eight years: 6.5 percent.

However, with the peso now on the rebound, inflation may be near its peak, forecast consultancy Capital Economics.

"Assuming that (inflation) remains broadly stable we anticipate only a couple more interest rate hikes," it said in a note.

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