Mexico inflation slows more than expected to over four-year low

(C) Reuters. A handful of people walk inside a shop[ing mall as the coronavirus disease (COVID-19) outbreak continues in Mexico City

MEXICO CITY (Reuters) – Mexican inflation eased in the first half of April to its lowest in more than four years, official data showed on Thursday, potentially giving the central bank more scope to cut borrowing costs during the slump sparked by the coronavirus outbreak.

Data from the national statistics agency showed consumer prices rose by 2.08% in the year through early April, undershooting a Reuters poll forecast of 2.19%.

That was the lowest level since a rate of 2.00% in December 2015. Nevertheless, the core inflation index, which strips out some volatile food and energy costs, stood at a rate of 3.40%, slightly above the 3.36% forecast by the poll.

Mexican inflation was 3.25% in March.

Mexico’s economy is expected to suffer its biggest contraction in years in 2020 due to the impact of the novel coronavirus, and the central bank on Tuesday cut its benchmark lending rate by 50 basis points to 6%.

Still, Mexico’s key interest rate is far higher than in the leading western economies, and analysts expect borrowing costs to fall further in the months ahead.

The central bank targets an inflation rate of 3% with a tolerance of one percentage point above or below that.

The latest data showed consumer prices fell 0.72% during the first half of April compared with the previous two-week period. The core price index climbed 0.20% over the period.