Mexico’s annual inflation rate took a tumble last month, hitting a record low. The tumble was the result of seasonal electricity subsidies and a sluggish economy. Even with the new low, the central bank is still expected to raise interest rates as soon as US borrowing costs increase.
On Tuesday, the national statistics agency says that inflation over the past 12 months slowed to 2.88 percent, which is below the 2.92 percent expected and the 3.06 percent annual rate in April. The annual rate is the lowest on record in central bank going back to 1970.
During the lukewarm economy, Mexico’s central bank continues to hold its key interest rate at a record low 3 percent and said that inflation would be below its 3 percent target for the remainder of the year.
Officials also feel that the deep slump in the peso was not encouraging wider price pressures. Since April, consumer prices fell 0.50 percent, compared to the 0.47 percent expected drop, on decreased electricity fees as well as lower tomato and egg prices. However, core inflation rose 0.12 percent.
After last week’s increase in US jobs and expectations that the US Federal Reserve will begin increasing interest rates later in the year, the Mexican peso hit a record low.