MEXICO CITY (Reuters) - Mexico’s finance minister said on Wednesday that tomato prices were to blame for annual inflation rising to the fastest pace in more than 8-1/2 years in July, a reading that topped forecasts and could pressure the central bank to keep interest rates high.
Mexican consumer prices rose 6.44 percent in the year through July MXCPIA=ECI, the national statistics agency INEGI said on Wednesday, above the 6.37 percent rate forecast in a Reuters poll. It was the highest reading since December 2008.
Fruits and vegetable prices rose 21.86 percent in July on an annual basis, INEGI said.
Speaking in Mexico City, Finance Minister Jose Antonio Meade said that excluding a tomato price surge, inflation would have come in 30 basis points lower.
“In general terms, we still think that the inflation trajectory will be decreasing,” Meade told reporters, adding that the current peso level will help curb price pressures.
The annual core rate MXCCPI=ECI, which strips out some volatile food and energy prices, rose to 4.94 percent, in line with the poll.
Mexico’s central bank will release its next monetary policy decision on Thursday, with all analysts polled by Reuters expecting interest rates to remain steady at 7.00 percent.
The central bank has hiked interest rates in its previous seven meetings, taking the rate to a more than eight-year high.
In an interview with Reuters last month, Banco de Mexico Governor Agustin Carstens said it was likely the bank would pause its cycle of rate hikes in August.
A recovery in the Mexican peso this year has dampened concerns that currency weakness could fan inflation even higher.
Mexico’s peso has rallied from a record low reached in January as U.S. President Donald Trump backed away from threats to impose big tariffs on imports from Mexico and moved toward a renegotiation of the North American Free Trade Agreement.
Consumer prices MXINFL=ECI rose 0.38 percent in July, according to non-seasonally adjusted figures, while the core index rose 0.27 percent during the month MXCPIX=ECI.
On top of inflation, Mexico’s economy faces headwinds from high interest rates and uncertainty around elections next year as well as NAFTA talks starting next week with the United States and Canada.
Moody’s said separately on Wednesday that a successful trade deal resolution would not be enough to remove the country’s impediments to faster economic growth.
Implementation of the country’s wide-ranging reforms and efforts to tackle stagnant productivity would help Latin America’s No. 2 economy, Moody’s said.
Reporting by Gabriel Stargardter; Editing by Meredith Mazzilli