April 9, 2018 / 1:04 PM / 17 days ago

Analysts expect Mexico central bank to hold rates with inflation easing

MEXICO CITY (Reuters) - Mexican inflation cooled more than expected in March to the lowest level in over a year, official data showed on Monday, leading analysts to predict the central bank will not change rates at this week’s monetary policy meeting.

FILE PHOTO - A view of Mexico city?s skyline during a sunset October 17, 2011. REUTERS/Carlos Jasso

The pace of consumer price gains in the 12 months through March MXCPIA=ECI slowed to 5.04 percent, the national statistics agency said. That was below analyst expectations in a Reuters poll for 5.12 percent, and down from a 5.34 percent rate in February.

It was the lowest rate since February 2017, when annual inflation reached 4.86 percent. The central bank targets inflation of 3 percent, with a 1 percentage point tolerance.

In early February, Mexico’s central bank raised interest rates to a nine-year high of 7.50 percent, and said it could act again if needed to contain worries that inflation may not cool as quickly as forecast.

However, analysts said the latest inflation data may prompt the bank to pause.

“The data support our view – which the markets have now come round to – that the central bank will leave interest rates unchanged (rather than hike them) at Thursday’s policy meeting,” Capital Economics said in a note.

Alberto Ramos, from Goldman Sachs, said that “barring new negative shocks to inflation,” rates should “remain on hold at 7.50 percent for a while.”

The annual rate of core inflation MXCCPI=ECI, which strips out some volatile food and energy prices, was 4.02 percent, below the 4.06 percent predicted by the Reuters poll.

Consumer prices MXINFL=ECI rose 0.32 percent in March from the prior month, while the core index rose 0.33 percent during the month MXCPIX=ECI.

Reporting by Gabriel Stargardter; editing by Jonathan Oatis and Phil Berlowitz

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