Mexico’s headline inflation saw a slight increase in the first half of October, climbing to 4.67%, according to a Reuters poll of 10 analysts. This marks an uptick from the 4.50% reported in late September, which had been the lowest level since March. Analysts attribute this increase largely to the seasonal rise in electricity prices, as government subsidies in some regions ended with the close of the hot season.
Despite the rise in headline inflation, core inflation, which strips out volatile prices, continued its downward trend. The poll suggests that core inflation could drop to 3.84%, its lowest point since January 2021. Over the first two weeks of October, headline prices rose by 0.42%, while core prices increased by a more modest 0.20%.
This trend reinforces expectations that the Bank of Mexico will continue cutting its benchmark interest rate, which currently stands at 10.50% following a recent 25-basis-point cut. The central bank has already enacted three rate reductions this year and is expected to continue on this path, with two more policy decisions scheduled for November and December.
As inflation continues to decelerate, analysts anticipate the benchmark rate could end 2024 at 10%, with further reductions potentially bringing it down to 8% by the end of 2025. Mexico’s national statistics agency, INEGI, is set to release the official inflation data for early October on Thursday.
