Mexico inflation slows to 3-year low, fuels rate cut forecasts

MEXICO CITY (Reuters) - Mexican consumer prices cooled for a fifth straight month in September, data published by the INEGI national statistics agency on Wednesday showed, falling in line with expectations and fueling expectations for more interest rate cuts.

Consumer prices rose 3.00% in the year through September and rose 0.26% in September, according to non-seasonally adjusted figures.

That brings the headline annual rate to its lowest monthly figure since September 2016 and exactly in line with the central bank’s target rate of 3% with a 1 percentage-point tolerance threshold above and below that.

Analysts polled by Reuters had expected inflation to slow to 3.00% in September from 3.16% in the previous month.

“We expect that policymakers will continue the easing cycle that they began in August,” said John Ashbourne, senior emerging markets economist at London-based Capital Economics.

Late last month, the Bank of Mexico cut its main lending rate by 25 basis points for the second meeting in succession, taking it to 7.75%, as the five-member board sought to ease borrowing costs for businesses in the country’s misfiring economy.

“Indeed, given the surprisingly dovish tone of the most recent policy board meeting, we think that the key rate will be cut by 25 basis points in both November and in December, taking it to 7.25% by the end of the year,” Ashbourne added in a note to clients.

The core index, which strips out some volatile food and energy prices, rose 0.30% during September MXCPIX=ECI.

Reporting by Anthony Esposito; Editing by Nick Zieminski