Inflation Threatens Government's Popularity

July 2008 | Risk Summary

Although inflation dropped between May and June from 4.95% to 4.74% y-o-y, bi-weekly data shows an implied y-o-y increase of over 5% for both the second half of May and first half of June. More significant was the rise of core inflation to 5.1% in the first half of June, showing the inflationary shock of global food and energy price rises is being passed on to Mexican consumers. Failure to bring core inflation under control in the short term could well create political pressure on the government to act on behalf of the consumer.

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