The pick-up in Mexican inflation last month was due almost entirely to a rise in food prices. By contrast, core inflation remains more subdued. The lagged effects of higher global commodity prices are likely to lead to a further rise in headline inflation over the coming months, but we think that it should start to fall again by the end of the year. Accordingly, if policymakers hold their nerve, as we think likely, interest rates may not start to move up until the second half of 2012.
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