Mexico’s annual headline inflation rate increased in October from the previous month as fruit and vegetable prices surged.
The national statistics agency INEGI reported Thursday that headline inflation rose to 4.76% in October, up from an annual rate of 4.58% in September. The rate is slightly higher than the 4.73% median forecast of analysts surveyed by Citibanamex.
The increase in inflation in October broke a two-month streak of declines in the annual headline rate.
Month-over-month inflation was 0.55% in October, while the annual core rate, which excludes volatile food and energy prices, declined for a 21st consecutive month to 3.80%.
The decrease in the closely-watched core rate likely keeps the Bank of Mexico (Banxico) on track for another interest rate cut next week, the Bloomberg news agency reported.
The central bank — which targets a 3% headline inflation rate — has reduced its key rate on three occasions this year, shaving a combined 75 basis points off borrowing costs. The most recent 25-basis-point cut came in September, leaving Banxico’s benchmark rate at 10.50%.
Fruit and vegetable prices up almost 16%
INEGI’s data shows that fruit and vegetables were 15.90% more expensive in October than in the same month of 2023. That’s the highest inflation rate for those products since July, and represents an increase of more than eight points compared to September.
Varying weather conditions have caused produce prices to fluctuate significantly this year.
Annual inflation for meat was 6.17% in October, up one point from the rate in September.
Prices in the combined category of agricultural products (fruit, vegetables and meat) were 10.92% higher than a year earlier.
Annual inflation for services was 4.98% in October, while energy prices, including those for electricity and gasoline, rose 4.62%. Compared to September, nationwide electricity prices increased 18.07% in October due to the end of the summertime electricity subsidies program in various cities including Mérida, Monterrey, Acapulco, Campeche and Cancún.
Annual inflation for processed food, beverages and tobacco was 3.81% in October, while non-food goods were 1.63% more expensive.
Will inflation trend down in the final months of 2024?
Andrés Abadía, chief Latin America economist at Pantheon Macroeconomics, is predicting that inflation will fall in the fourth quarter of 2024, despite the uptick in October.
“Our expectation is based on several factors, including less pronounced base effects, weakening internal demand, improving supply chain conditions and more favorable climate patterns,” he said.
The median projection of analysts surveyed by Citibanamex this month is that Mexico’s annual headline inflation rate will stand at 4.41% at the end of the year.
Bloomberg reported that most analysts believe that the long-running decline in core inflation will continue “going forward.”
With reports from El Financiero, El Economista and Bloomberg
