Annual headline inflation nears upper target limit
Mexico’s annual headline inflation accelerated to 3.74% in the first half of September, edging closer to the upper limit of the central bank’s 3% target range. The figure aligns broadly with market forecasts and marks an uptick from the previous 3.49%, according to data released by national statistics agency INEGI.
This increase comes just days before Mexico’s central bank, Banxico, is expected to announce its next monetary policy move. Markets widely anticipate a 25 basis-point rate cut, though the latest inflation data introduces fresh uncertainty. Analysts now predict the bank may adopt a more cautious tone in its guidance.
Core inflation remains persistent
Core inflation, which excludes volatile food and energy prices, rose to 4.26% annually, slightly above the 4.24% expected by analysts and higher than the previous 4.21%. The persistence of core price pressures adds complexity to Banxico’s decision-making, especially as it weighs the need for rate cuts to support economic activity.
On a monthly basis, consumer prices rose 0.18%, reversing a previous 0.02% decline. Core prices also continued to climb, increasing 0.22% month-on-month from 0.09% earlier.
Banxico walks a tightrope on policy
Despite the inflation uptick, some analysts believe Banxico may still proceed with its planned rate cut this week. Brokerage firm Monex noted that the central bank expects a further deepening of economic slack — or weakness in activity — which could gradually relieve inflationary pressures over time.
Felipe Barragan, research strategist at Pepperstone, commented that the combination of headline inflation near expectations and sticky core prices keeps the upcoming decision “in play,” but signals the need for careful messaging about future rate moves.
Outlook for the rest of 2025
Looking ahead, market forecasts suggest inflation will reach 3.9% by year-end, remaining within Banxico’s target range of 3%, plus or minus one percentage point. However, persistent core inflation and global economic uncertainties may influence the central bank’s policy trajectory in the months to come.
Investors and economists alike will closely monitor Banxico’s upcoming statement for any shifts in tone or forward guidance, especially as the bank balances inflation control with the need to stimulate a slowing economy.
