BLOOMBERG BUSINESS: By most traditional economic gauges, little is going right today for Mexico. Growth is sluggish, oil exports are falling and credit markets have started to dry up.
Yet beneath the surface, a surprising and little-understood transformation is ushering in one of the country’s most important developments in years: the peso’s age-old link with inflation has been broken. No longer does a plunge in its value trigger an automatic surge in consumer prices. In fact, the most recent data suggest that it causes almost no inflation at all.
It may seem like an obscure, wonky topic — “pass-through” is the term used by analysts — but it’s hard to underestimate the significance in an emerging-market nation like Mexico that’s trying to climb into the ranks of the world’s developed economies.
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