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.

While lime and tomato prices continued to rise, other vegetables such as nopales, chayotes and onions became more affordable during the first two weeks of March in Mexico. (Andrea Murcia/Cuartoscuro).

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.

Source: https://mexiconewsdaily.com/news/mexicos-inflation-slows-in-march/