Annual headline inflation declined to a 17-month low of 6.85% in March, while Mexico’s core rate also fell but remains above 8%.

As reported by the national statistics agency INEGI on Wednesday, the headline rate is 0.77 percentage points below the February reading of 7.62%.

The headline rate, which has dropped more than one percentage point since January and almost two points since last year’s peak, is slightly below the 6.89% consensus forecast of economists surveyed by Citibanamex. It is still well above the central bank’s target of 3%, with a tolerance of one percentage point in either direction.

INEGI reported that the annual core inflation rate, which excludes volatile food and energy prices, was 8.09% in March, down from 8.29% in February. In contrast to the headline rate, the core rate is slightly above the consensus forecast of analysts polled by Citibanamex.

Alberto Ramos, head of Latin America economics at Goldman Sachs, said in a research note that “core inflation was impacted by the high readings in services, driven by the seasonal increase in airfares and tourism packages, and food services.”

INEGI data show that annual inflation for services was 5.71% in March, up from 5.55% in February.

Inflation for processed food, beverages, and tobacco was 12.95%, whereas prices for fresh agricultural products, including fruit, vegetables, and meat, were 7.24% higher than a year prior. Energy prices, including those for fuel and electricity, rose just 0.16% on an annual basis.

Publication of the latest INEGI inflation data comes six days after members of the Bank of Mexico (Banxico) governing board voted unanimously to raise the central bank’s benchmark interest rate by 25 basis points to a record high of 11.25%. The bank has lifted its key rate by 725 basis points in the current tightening cycle, which began in June 2021, as it seeks to combat high inflation.

Andrés Abadia, chief Latin America economist at the economic research consultancy Pantheon Macroeconomics, wrote that the latest INEGI data allows Banxico to breathe a “sigh of relief” as it confirms inflation is continuing to decline. Abadia said he expects the downward trajectory to continue in the months ahead.

With reports from El Financiero, El Economista, and Reuters