The Day at a Glance | February 9 2021

The Top

· Inflation in Mexico rebounded more than expected during January.

Economic environment

Inflationary data in Mexico for the month of January exceeded estimates. The Consumer Price Index grew 0.86% monthly in the first month of the year (vs. 0.78% e.) and the annual rate of inflation set at 3.54%, according to INEGI figures. Prices with the largest upward impact were energy prices (5.23%) and goods (0.55%). This is the highest rate of inflation for the first month of the year since 2017, boosted especially by the non-underlying component (2.4%). Regarding energy resources, the rises were seen in gasoline prices (low octane 6.06%; high octane 5.35%) and domestic LP gas (9%). Underlying inflation increased 0.36% during the month and set at 3.84% annual, boosted by food prices (0.69%); meanwhile, services continued to show modest growth rates (0.14%). The data could reinforce Mexico`s Central Bank`s caution, which will make a monetary policy decision this week. For March and April, an important rebound is expected to occur regarding the annual rate of inflation – once the prices recorded a considerable drop during these months last year because of the start of the pandemic. Banxico has stated that it favors seeing a confirmed downwards trend in inflation before continuing to cut the interest rate; which could happen after April. However, the market and the analysts` consensus expect to see a 25 base point cut this Thursday and one more during the rest of the year to close 2021 at 3.75%.