May 7, 2020 / 12:02 PM / a month ago

UPDATE 1-Mexico annual inflation tumbles to lowest level since 2015

MEXICO CITY, May 7 (Reuters) - Mexican consumer prices grew 2.15% in the year through April, down from 3.25% a month earlier, the national statistics agency said on Thursday, falling to their lowest rate since 2015 and giving the central bank more space to ease economic pressures.

The inflation rate was lowered by a decline in the prices of energy and agricultural products, as well as a decrease in government subsidies. It came in slightly below average estimates, with 14 analysts polled by Reuters expecting an inflation rate of 2.20% in April.

Mexico’s economy has been hammered by the coronavirus outbreak and sharp falls in global oil prices, with some analysts expecting gross national product to contract by as much as 10% this year. The peso currency has lost about 29% against the dollar in the last three months.

The decline in prices has pushed inflation well below the central bank’s 3% target rate and to its lowest level since December 2015, when prices increased 2.13%.

Collapsing inflation may give the bank’s rate-setters more room to cut interest rates further at their next monetary policy meeting, scheduled for May 14.

Mexico’s central bank has cut its benchmark interest rate by a total of 100 basis points to 6.0% at two non-scheduled policy meetings since late March, and last month it also announced additional measures to boost financial system liquidity.

Consumer prices fell 1.01 percent in April, according to non-seasonally adjusted figures.

The core index, which strips out some volatile food and energy prices, rose 0.36 percent during the month (Reporting by Drazen Jorgic; Editing by Steve Orlofsky)

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