Monday, June 2, 2025

Mexico’s inflation rate decelerates as central bank prepares for a rate cut

After Mexico’s headline inflation rate saw a slight uptick in February, prices for some goods decreased during the first two weeks of March.

Mexico’s national statistics agency INEGI released its bi-weekly inflation report Monday showing that inflation has remained below 4% this year, coming in at 3.67% in mid-March. This is down from the 3.77 reported in February and well below the 4.48% recorded a year ago.

Core inflation, which excludes the typically more volatile prices of food and energy, came in at 3.56% in mid-March, down from 3.63% a month earlier. The 0.14% increase in annualized inflation during the first two weeks of March was just over half the mid-March core inflation rate in 2024 (0.27%)

The news agency Reuters said the figures came in below market forecasts and, coupled with the slowdown represented in January’s economic activity figures (the country’s economy shrank 0.2%, according to INEGI), Mexico’s central bank (Banxico) is likely to press ahead with its monetary easing cycle.

“The economy is becoming more sensitive to tighter financial conditions and a less favorable external backdrop,” Andres Abadia, Pantheon Macroeconomics’ chief Latin America economist, said in a note to clients.

In the note, Abadia suggested the latest inflation news will give Banxico the freedom to continue cutting its benchmark interest rate, “starting with a 50 basis-points move this week.”

As Banxico prepares to deliver its next monetary policy decision on Thursday, inflation remains solidly within the bank’s 2% to 4% target range. At its previous meeting on Feb. 6, Banxico cited cooling inflation and weakness in the country’s economy in announcing a 50-basis-point cut.

The INEGI report indicated that prices of tomatoes (up 10.45%) and limes (9.02%) rose the most during the fortnight in question, while the vegetables chayote (down 9.17%), onions (down 6.04%) and nopales (down 5.58%) were the best bargains.

INEGI also made mention of the price of chicken (down 0.37%) even though its price differential was not among the top five in either the “up” or “down” category.

Additionally, INEGI noted that egg prices shrank by 0.84%. This is a notable decrease as U.S. Customs and Border Patrol has sought to crack down on egg smuggling from Mexico.

With reports from N+ and Forbes México

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