From the Wall Street Journal (page A14 in the print edition):
Signs of higher inflation in Brazil and Mexico dimmed hopes of a break in interest-rate increases.
In Mexico, inflation rose 0.36% in April, and 4.6% for the 12 months through April. That was higher than the 4.39% recorded for the year through March. The latest increase, largely coming from a jump in vegetable prices, has put inflation even further beyond the bank's target range of 2% to 4% a year.
Core inflation, which excludes fresh fruit and vegetables, energy and education, rose only 0.21% in April, however, bringing annual core inflation down to 3.46% from 3.61% at the end of March. It was the sixth straight month of declines in annual core inflation.
Some economists think that given the decline in core inflation, the Bank of Mexico will hold off further monetary tightening this month. Others, however, are forecasting further tightening from Mexico's central bank Friday.
"The figure is high," said Eduardo Avila, an economist with consulting firm Prognosis. "Given that mid-term inflation projections are still far from the [central bank's] target, I think monetary policy will be tightened on Friday."
A year of monetary tightening by the central bank, coupled with rising U.S. rates, has led Mexican overnight rates to practically double in the past year to about 9.8%.
Further south:
In Brazil, meanwhile, inflation expectations continued to nudge higher yesterday. According to a central-bank survey, markets now expect Brazil's benchmark IPCA inflation index to rise 6.3% in 2005 and 5.85% over the rolling 12-month period ahead. The central bank's target for 2005 inflation is 5.1% with a tolerance band up to 7%.
The central bank has raised its benchmark Selic rate to 19.5% in a bid to contain inflation. Analysts now believe the bank may have to maintain higher interest rates for longer than expected.
Nonetheless...
The news wasn't all bad, however.