Mexican Inflation Bites on the Beef Bone
Mexico is suffering from an unexpected problem: inflation has accelerated due to a temporary ban on U.S. beef. This is affecting the price of all sorts of everyday items items: even the price of the tacos served from the street carts in Mexico City.
Consumer prices rose 0.6 percent in February, more than double the 0.28 percent rise in February 2003. And Mexico's 12-month inflation rate rose to 4.53 percent in February from 4.2 percent in January.
Meat prices in Mexico have risen from anywhere between 15 and 40 percent since Mexico banned imports of U.S. beef in December after the discovery of a cow infected with mad cow disease in Washington state. In fact Mexico eased the import restrictions last week and in a month or so prices are expected to return to normal.
But........... the story has an unusual twist: the pic-up in inflation, which reverses a slowdown to a record low in 2003, is leading the central bank to consider a second reduction this year in lending in the overnight market in order to boost interest rates, prompting accusations that it is unnecessarily slowing down the economy.
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