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Mexico: Inflation
Country Study > Chapter 3 > The Economy > Macroeconomic Management > Inflation

INFLATION


Control of inflation was the main policy objective of the de la Madrid and Salinas administrations between 1987 and 1993, despite the cost of this policy in terms of the currency's continued real appreciation and the resultant need to maintain high interest rates to attract foreign investment and deter capital flight. The government made steady progress against inflation following the PSE's introduction in late 1987 (replaced in 1989 by the PECE, which was revised and updated annually between 1989 and 1993). Largely as a result of the wage and price restraints included in these pacts, inflation fell from 159 percent in 1987 to 20 percent in 1989. In 1990 it rose slightly to 30 percent (double the initial target of 15 percent), as the government eased credit, eliminated price subsidies, and realigned public-sector prices as well as some private-sector prices. Thereafter, the inflation rate fell steadily from 23 percent in 1991 to 7 percent in 1994, Mexico's first single-digit inflation rate in twenty years.

Consumer price inflation rose sharply between January and April 1995 in response to the December 1994 new peso devaluation, then abated between May and August as the new peso appreciated. When the currency came under renewed pressure during the last four months of the year, however, inflation rose more quickly. It soared as high as 52 percent (Mexico's highest inflation rate since 1987) by December 1995, although it averaged 35 percent for the year. A 21 percent increase in the minimum wage and monthly adjustments of public prices contributed to the high inflation. Consumer prices rose by 11 percent during the first four months of 1996, despite Mexico's continued recession and the new peso's real appreciation. The government conservatively projected an inflation rate of 21 percent for all of 1996.

Data as of June 1996




Last Updated: June 1996


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Mexico was first published in 1996. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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