Headline inflation in Mexico moderated in January, although the underlying variable accelerated to its highest level in more than 20 years, reinforcing expectations that the central bank would raise the benchmark interest rate for the sixth consecutive time this week.

The National Consumer Price Index (INPC) stood at 7.07%, according to figures released this Wednesday by the statistics institute, INEGI. Analysts projected that it would grow to 7.02% from 7.36% in December.

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In contrast, core inflation, considered a better parameter to measure the trajectory of prices because it eliminates high volatility products, registered a variation of 6.21%, its highest level since September 2001, compared to 5.94% in the previous month.

The Bank of Mexico (Banxico) raised its benchmark interest rate in mid-December, above expectations, to take it to 5.50%, citing a deterioration in inflation forecasts.

The next monetary policy decision, the first of eight this year, is scheduled for Thursday and the market expects a 50 basis point rate hike to 6%, according to a Reuters poll.

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Banxico has a permanent inflation target of 3% +/- one percentage point.

In January alone, consumer prices grew 0.59%, while the core index rose 0.62%, INEGI said. The increase in the INPC was driven in the month by prices of agricultural products such as lemon and chicken; low-octane gasoline and processed foods.

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