Mexican inflation coming from abroad, not public spending, says finance official
Mexican inflation is mostly coming from abroad and is not a product of public spending, Deputy Finance Minister Gabriel Yorio said on Thursday, noting he did not expect any sharp movements in the peso currency due to the country's upcoming general election.
Some pressures, however, are being observed in the services sector, Yorio told Reuters in an interview on the sidelines of Mexico's annual banking convention in Acapulco.
"We don't agree that public spending is generating inflationary dynamics. I think the inflationary dynamics are mostly still being imported," Yorio said.
Annual headline inflation in Latin America's second-largest economy reached 4.42% in March, up from 4.40% in February and above the Bank of Mexico's target of 3%, plus or minus a percentage point.
"We're once again seeing an increase in maritime transportation costs. For example, due to geopolitical tensions in the Middle East some ships can no longer pass through the Suez Canal," Yorio said. "Panama has no water," he added, referring to the drought which has limited crossings at the Panama Canal.
"All these elements are once again generating price pressures, which in turn are generating inflationary dynamics."
Earlier this week, Bank of Mexico Deputy Governor Jonathan Heath said expansive fiscal policy in the run-up to general elections was complicating the bank's work in taming inflation this year.
President Andres Manuel Lopez Obrador's government has looked to finish several flagship projects ahead of presidential elections in June. Ruling party candidate Claudia Sheinbaum is expected to win the vote by a wide margin.
The elections in Mexico are not expected to prompt a "strong correction" of the peso currency, Yorio said.
The peso, one of the world's most-traded currencies, had appreciated to its strongest level in nearly nine years last week, at 16.2559 pesos per dollar. The Mexican currency has weakened sharply in recent days on growing risk aversion.