Inflation will likely be lower during 2015 given favorable base tax effects, more moderate gasoline and electricity price adjustments, and the elimination of national long-distance phone charges. In fact, January first-half inflation was 3.1 percent year-over-year, compared to 4.6 percent in the same time period of 2014. The Bank of Mexico expects inflation to approach 3 percent throughout this year.
8 However, there are risks to this scenario. These include a potentially weaker peso for a prolonged period of time, which, despite low pass-through in recent years, may have an impact on inflation. Other risks are renewed substantial rises in noncore price components and eventual aggregate demand pressures. 9 Concluding remarks Three external issues will be key determinants of Mexico’s near-term economic performance.