Inflation Rose in SeptemberBy Sofía Hanna | Wed, 09/29/2021 - 12:03
Inflation in the first half of September surprised experts by rising amid signs of widespread pressure, affecting the prices of goods, processed foods, soft drinks, oils, milk and cars. Furthermore, the reference rate is expected to see three increases of 25 base points (bp) before the end of 2021.
Annual inflation rose from 5.59 percent on average in August to 5.87 percent in September, according to a report by Banorte analysts. This trend is expected to continue for the rest of the year. On the other hand, the service sector advanced 0.2 percent, while education at 1.2 percent due to the return to school. Inflation of fruits and vegetables increased by 2.4 percent, energy by 0.8 percent and LP gas by 2.3 percent.
The data led analysts at Banorte to forecast that annual inflation will continue rising. "We believe that (annual inflation) will continue with an upward trend towards the end of the year... In turn, we believe that the pandemic could continue to influence price dynamics, especially due to signs of greater caution among consumers that suggest some weakness in domestic demand, despite the fact that mobility levels have still remained strong," reads the report.
Despite the increase in inflation, Banxico announced it would raise its rate again by 25 bp next week. Concerns about China, which is focused on Evergrande Group, and other countries such as Brazil, which increased the Selic rate yesterday by 100bp, are raising concerns about potential financial instability in emerging countries. Banorte expects Banxico to remain prudent despite the diversity of opinions on its Governing Board.