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Mexico's inflation hits 16-year high

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Staff Writer | January 11, 2018
Mexico's annual inflation rate hit a 16-year high in 2017, reaching 6.77 percent, according to official figures.
Mexico annual inflation
LatAm   The National Statistics and Geography Institute:
The National Statistics and Geography Institute (Inegi) said last year's rate was the highest since May 2001 when it reached 6.95 percent.

The National Consumer Price Index (INPC) rose 0.59 percent by December, driven by a 42.91-percent jump in the price of tomatoes, a 22.69-percent increase in air fares, and 7.43-percent increase in tourism services, among other increases.

The core inflation index grew 0.42 percent in December, registering the biggest growth since April, while the annual core inflation index for 2017 stood at 4.87 percent.

A core index of over 4 percent was due to a volatile peso last year, according to Gabriela Siller, director of economic analysis at Banco Base

Mexico's central bank, Banco de Mexico (Banxico), may decide to raise the benchmark interest rate by 25 basis points from February, the Ve por Mas Bank (BX+) said, after the Inegi released its figures.

In December, Banxico raised its benchmark rate to 7.25 percent from 7 percent, in response to rising inflation.

In addition to a depreciating peso, Mexico is suffering from "high volatility" sparked by the uncertainty around the North American Free Trade Agreement (NAFTA), which it is currently renegotiating with Canada and the United States.

Mexico's Economy Minister Ildefonso Guajardo downplayed the inflation numbers, telling reporters at an event in Mexico City that the close and start of the year always show seasonal fluctuations.

Guajardo said he expected to see inflation dip again at the end of the month, in keeping with the central bank target of 3 percent, with a one-point margin of error up or down.