The Mexican economy is growing despite significant headwinds, but inflation is above the Bank of Mexico’s target range, according to the latest data from the national statistics agency INEGI.
On Monday, INEGI published data that showed that the Mexican economy grew 0.5% in April compared to the previous month and 1.4% in annual terms.
On Tuesday, INEGI reported that Mexico’s annual headline inflation rate was 4.51% in the first half of June, above the Bank of Mexico’s target of 3% with tolerance of one percentage point in either direction. The annual rate was lower than the 4.62% reading for the second half of May, but above the 4.42% rate for last month as a whole.
Growth data by sector
INEGI’s data showed that Mexico’s primary or agricultural sector grew 3.2% in annual terms in April, but declined 3.7% compared to March in seasonally adjusted terms.
The secondary sector, which includes manufacturing, mining, construction and electricity generation and distribution, declined 0.7% in annual terms in April, but grew 0.1% compared to March.
The tertiary or services sector grew 2.2% in annual terms in April and 0.9% compared to March.
The 1.4% annual growth and 0.5% month-over-month growth the Mexican economy recorded in April came the same month that U.S. tariffs on foreign vehicles, including ones made in Mexico, took effect. U.S. tariffs on foreign steel and aluminum entered into force in March at a rate of 25%. The rate doubled to 50% at the start of June.
Mexican goods that don’t comply with the USMCA free trade pact have been subject to a 25% tariff when entering the United States — Mexico’s largest trade partner — since early March.
Gabriela Siller, director of economic analysis at Banco Base, described the 0.5% month-over-month expansion of the Mexican economy as “good news,” noting that the growth rate was above the expectation of a 0.26% decline.
Modest growth in first 4 months of 2025
INEGI’s data showed that the Mexican economy grew 0.1% between January and April compared to the same period of last year.
The primary sector grew 6.5% in the period, while the tertiary sector expanded 0.7%.
The secondary sector declined 1.6% compared to the first four months of 2024.
All four sub-sectors of the secondary sector declined between January and April. The mining sector declined 8.9%; the construction sector contracted by 2%; the electricity/gas/water sector shrank 1.1%; and the manufacturing sector decreased 0.2%.
The World Bank is currently forecasting that the Mexican economy will grow just 0.2% in 2025. Increased trade barriers and greater uncertainty globally are expected to slow economic growth across Latin America, according to the World Bank’s June Global Economic Prospects report.
The International Monetary Fund is predicting that the Mexican economy will contract 0.3% in 2025.
Inflation data in detail
Headline inflation increased 0.10% in the first half of June compared to the second half of May. That figure was just below the 0.11% increase predicted by economists surveyed by Reuters.
The 4.51% annual headline rate was just below the 4.52% consensus forecast of economists polled by Reuters.
En la primera quincena de junio 2025, el Índice Nacional de Precios al Consumidor #INPC presentó un nivel de 140.292 y representó un aumento de 0.10% respecto a la quincena previa. Con este resultado, la inflación general anual fue de 4.51%.
Por componente, la inflación anual… pic.twitter.com/v3rgnnIBAu
— INEGI INFORMA (@INEGI_INFORMA) June 24, 2025
INEGI also reported that Mexico’s core inflation rate, which excludes volatile food and energy prices, was 4.20% in the first half of June, up from 4.06% across May.
Meat prices increased 11.86% compared to a year earlier, while fruit and vegetables were 1.72% cheaper than in the first half of June 2024.
Prices for processed food, beverages and tobacco increased 4.82% annually, while non-food goods were 2.98% more expensive.
Mexicans paid 4.61% more for services than a year earlier, while energy costs, including those for gasoline and electricity, rose 3.92% in annual terms.
Will the Bank of Mexico cut interest rates again this week?
The publication of the inflation data for the first half of the month comes ahead of a monetary policy meeting of the Bank of Mexico (Banxico) board on Thursday.
The central bank has cut its benchmark interest rate by 50 basis points after all three monetary policy meetings held so far this year, most recently last month. Banxico’s key rate is currently set at 8.50%.
Siller, the Banco Base analyst, said on X that the central bank “should pause” its rate-cutting cycle given that headline inflation is “far” from its objective and core inflation increased in the first half of June.
Alberto Ramos, chief Latin America economist at Goldman Sachs, said that INEGI’s latest inflation data showed “uncomfortable core dynamics, particularly on services,” and asserted that Banxico will notice that.
The bank, he said, “will probably soften the guidance for August suggesting that the pace of rate cuts is likely to decelerate in coming meetings.”
“But for this week’s monetary policy meeting a 50bp cut is likely still in play,” Ramos said.
Twenty-one of 26 economists surveyed by Reuters before the latest inflation data was released predicted that the Banxico board will vote in favor of a 50 basis point cut at this week’s monetary policy meeting.
Bloomberg reported that Banxico “has suggested it may proceed with the same pace of cuts this Thursday,” but noted that “board members appear to be divided, with Deputy Governor Jonathan Heath saying the bank would do well to consider pausing before noting that policymakers would likely still proceed with a 50-basis-point cut.”
The news agency noted that Bloomberg Economics has “predicted that the bank could, out of caution, cut rates by only 25 basis points in June.”
The Bank of Mexico will announce the board’s decision shortly after Thursday’s monetary policy meeting. Any change to the bank’s benchmark interest rate will take effect on Friday.
Mexico News Daily
