Mexico’s Inflation Eases in October, but Remains Above Target
Introduction
Mexico’s inflation rate is expected to have eased in the first half of October, according to a recent Reuters poll. However, despite the slight decrease, it remains above the central bank’s target. This supports predictions that the benchmark lending rate will remain unchanged for an extended period.
Inflation Forecast
Analysts predict that the annual headline inflation for the first two weeks of October will be around 4.38%, the lowest rate since March 2021. Although it is a decrease, it still exceeds the monetary authority’s target of 3%, plus or minus one percentage point. Additionally, annual core inflation, which excludes volatile energy and food prices, is expected to reach 5.49%, the lowest level since October 2021.
Central Bank’s Response
The central bank, also known as Banxico, decided in its last meeting to maintain its key rate at 11.25% for the fourth consecutive time. Analysts predict that this rate will remain unchanged until early 2024. Furthermore, the bank’s board members have extended the deadline for inflation to converge to its target to the second quarter of 2025, compared to the previous fourth quarter of 2024.
Analysts’ Estimates
Analysts estimate that headline inflation increased by 0.34% compared to the previous two weeks, while core inflation rose by 0.20%. The official inflation data for the first half of October will be published by Mexico’s national statistics agency on Tuesday.
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