Would you bet on a Mexican rate decrease?

Consumer prices in Mexico edged down in April, leading investors to increase bets on easing by the central bank.

Image courtesy Pierette Guertin: http://www.photoxpress.com/search-stock-photos-photographer/Pierrette+Guertin/741463

Mexican retail

The INEGI reported Wednesday that the CPI increased just 3.41% on an annualized basis in April, well off of the 3.73% pace in March. The report is a six-month low for the Latin American country (EWW, quote).

Despite the benign rise overall, prices for food and beverages rose 6.4% over the year and by 0.15% for the month, higher than expected.

Slower growth in China and fears of a prolonged recession in the E.U. are keeping commodity pressures down for now. Further into the second half of the year, as the U.S. recovery gains momentum and Chinese stimulus kicks in, pricing pressures could reignite.

While the central bank did take a more accommodative tone at their last meeting, acknowledging the turbulence in world financial markets, they have held rates steady for 26 meetings and are one of the most conservative monetary authorities in the world when it comes to changing policy.

Lower consumer prices could directly help retailers like America Movil (AMX, quote) as consumers find their pesos going further. Strengthening retail sales may help increase advertising revenues at Grupo Televisa (TV, quote) as well.

Investors may want to hedge their portfolios around central bank meetings however, as the market may be disappointed if the authorities do not meet expectations for easing.