Mexico national statistics institute has announced that monthly inflation in October was 0.65 percent, up from 0.42 percent in September, taking the annual rate to 3.75 percent. In year on year terms, inflation rose to 3.75 percent in October, up from 3.45 percent the previous month, according to the Inegi release carried in Wednesday morning briefings.
Why it matters
The quickening puts Mexico in the same boat as the United States, where October CPI also came in hotter than expected at 0.4 percent on the month. The two economies are linked by trade, by supply chains and by the same global pressures on food and energy, and both central banks now face the same question: whether the inflation of the autumn is a blip or a turn. Mexico annual rate of 3.75 percent is close to target, while the United States is further from its own, so the Bank of Mexico has more room than the Fed.
The drivers are familiar across the region. Food prices rose in the United States in October, energy rose 0.7 percent, and shelter costs picked up again, and the Mexican release shows the same pattern of sticky prices in the categories households cannot avoid. The difference is the starting point: Mexico annual rate of 3.75 percent is close to target, while the United States is further from its own.
What happens next
The market reaction in Mexico was muted compared with the United States, where the 10 year yield climbed above 5 percent and the Fed December hike is now treated as certain. But the direction is the same, and the Bank of Mexico will be watching the November data as closely as the Fed watches its own.
What happens next will be decided by the November prints on both sides of the border. If inflation cools, the central banks can hold. If it quickens again, the rate path rises, and the borrowing costs that are already squeezing households will rise with it. For now, Mexico has joined the United States in reporting inflation that is hotter than expected. The United States October CPI also came in hot at 0.4 percent on the month, and both central banks now face the same question about whether the autumn inflation is a blip or a turn.
