Mexican inflation accelerated to 3.4% y/y in December and looks set to breach the upper-bound of the central bank’s 2-4% target range as soon as this month as a result of rising domestic fuel prices and the renewed drop in the peso. Intervention in the currency markets last week by the central bank appears to have stabilised the peso but it’s clear that interest rates will have to rise further too – starting with another 50bp hike (to 6.25%) at the next MPC meeting in February.
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