(Bloomberg) — Mexico central bank board member Jonathan Heath sounded the alarm about accelerating core inflation, saying in a series of tweets that the situation “looks grave” and may signal a structural problem.
Even though annual inflation at the end of 2021 was marginally slower than in November and even slower than analyst forecasts, it isn’t good news because core prices are rising faster, Heath said. The annual core figure stood at 6% in the last half of December.
It “signals the persistence of a more inertial or even structural problem,” Heath said in one Twitter post.
Heath’s hawkish tone will be watched closely by economists who are forecasting whether the central bank will keep raising borrowing costs by 50 basis points, or return to quarter-point hikes, as one survey suggests. Banxico, as the central bank is known, unexpectedly accelerated the pace of monetary tightening earlier this month, raising rates by half a percentage point to 5.50%.
Inflation slowed to 7.36% in December from 7.37% the previous month, data released Friday showed, but remained at more than double the bank’s target of 3%.
Read More: High Mexican Inflation Poses Challenge for New Banxico Chief
The deputy Banxico governor went on to say on Twitter that prices of services are fueling the inflationary process, while one component of food inflation that rose 8.11% is among the most worrisome.
Banxico’s next meeting is set to take place in February, the first one headed by Victoria Rodriguez Ceja, who replaced Alejandro Diaz de Leon at the start of 2022 as governor. The new leadership has added an element of uncertainty to future rate decisions as Mexico’s former spending chief has little monetary policy experience and her nomination by President Andres Manuel Lopez Obrador raised questions that she may be more likely to bend to his wishes.
Diaz de Leon had said before he left that the bank isn’t committed to further half-point increases in the future.
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