Mexico’s Inflation Eases, But Remains Above Target
Annual Inflation Continues to Decrease
Mexico’s annual inflation rate eased for the eighth consecutive month in September, standing at 4.45%. Although this is a positive trend, it still remains above the central bank’s target. The data released on Monday supports the forecast that the bank will maintain its current key interest rate.
Core Inflation Shows Improvement
In September, the annual core inflation, which excludes highly volatile items, was recorded at 5.76%. This figure aligns with market forecasts and represents the lowest level in nearly two years. However, it is important to note that inflation figures continue to surpass the Bank of Mexico’s target range of 3% plus or minus one percentage point.
Bank of Mexico’s Stance
At the end of September, the Bank of Mexico decided to keep the reference interest rate at a historic high of 11.25% for the fourth consecutive time. The bank cited a complicated and uncertain inflationary outlook as the reason behind this decision. Jason Tuvey, Deputy Chief Emerging Markets Economist at Capital Economics, emphasized that the bank’s concerns about persistent inflation were reinforced by the recent rise in services prices. Tuvey further added that an easing cycle is not expected until early next year, and rates will decrease at a slower pace than the consensus anticipates.
Price Trends and Consumer Impact
In September, consumer prices rose by 0.44% compared to the previous month. This figure slightly exceeded the expected increase of 0.45%. The closely watched core price index, which excludes volatile food and energy prices, rose by 0.36% during the same period. Overall, the inflation picture is gradually improving, thanks to the lagged effect of tighter financial conditions, the rebound of the Mexican peso in recent months, and lower raw-material prices, according to Pantheon Macroeconomics’ Chief Latin America Economist Andres Abadia.
In conclusion, Mexico’s inflation rate is showing signs of improvement; however, it remains above the central bank’s target. The Bank of Mexico’s decision to maintain the current interest rate reflects concerns about the future inflationary outlook. Experts predict that an easing cycle will not begin until next year, and rates will decrease at a slower pace than initially anticipated.
