Mexico’s inflation hits new low in December

Mexico’s annual inflation cooled to a fresh record low in early December, showing little impact from a sharply weaker peso currency after the central bank hiked rates for the first time in seven years.

Inflation in the 12 months through mid-December slowed to 2.00 percent, the national statistics institute said on Wednesday, well below the 2.21 percent reached in the full month of November, its seventh consecutive record low.

A poll of analysts by Reuters forecast a rate of 2.05 percent.

Mexico’s central bank has said it expects annual inflation to end the year around 2 percent, before climbing back to around the bank’s 3 percent target next year. But sluggish growth is containing price pressures in Latin America’s No. 2 economy.

Mexico’s central bank hiked borrowing costs last week off an all-time low in a bid to stem further weakening in the peso after the Federal Reserve lifted U.S. interest rates the day before.

Mexico’s peso, which had tumbled to a series of unprecedented lows this year on concerns of higher U.S. borrowing costs, has continued slipping since the rate hikes last week.

But the latest data underscored the so-far limited impact of peso weakness. While the depreciation of the currency has made imported goods more expensive, it has been offset by price drops, such as a big decrease in telecommunications costs.

The data showed that consumer prices rose by 0.26 percent in the first half of December. The analysts’ poll had forecast a 0.28 percent increase.

The core price index, which strips out some volatile food and energy prices rose by 0.27, above expectations for a 0.23 increase. That took the 12-month core inflation rate to 2.39 percent, in line with expectations for a 2.39 percent rise.

(Reporting by Alexandra Alper Editing by W Simon)