Overview and Key Figures
Mexico’s consumer inflation reported a minor uptick in the first half of August, staying within the Banco de México’s (Banxico) target range, according to data from the National Institute of Statistics and Geography (Inegi).
The National Consumer Price Index (INPC) showed a 0.02% decrease compared to the latter half of July, while annual inflation stood at 3.49%.
This marks a slight acceleration, as the previous quincena reported an inflation rate of 3.48%.
Although market expectations anticipated price increases, the final data surprised positively. A Reuters survey estimated annual inflation to be 3.66%, making the actual result lower than expected.
With this data, inflation remains within Banxico’s target range of 3% ±1 percentage point.
Banxico’s Interest Rate Policy
The Bank of Mexico is expected to continue reducing its interest rate. In the latest meeting, Banxico’s rate cut was of smaller magnitude, 25 basis points, placing it at 7.75%, the lowest level in three years.
The next monetary policy meeting will take place the following week, with expectations of another 25 basis point rate reduction.
Subyacente Inflation Under the Spotlight
Inegi’s report revealed that subyacente inflation, which excludes more volatile goods and services and is the metric Banxico considers for monetary policy decisions, experienced a slight deceleration.
In the first half of August, subyacente inflation reported a level of 4.21%, lower than the previous quincena’s 4.22%. This marks three consecutive quinzenes of deceleration, though it remains above Banxico’s range.
Within subyacente inflation, goods saw a yearly price increase of 3.97%, while services rose by 4.43%.
In contrast, non-subyacente inflation accelerated from 1.04% in the previous quincena to 1.10% in the first half of August.
Within non-subyacente inflation, agropecuary prices increased by 0.44%, while energy and government-authorized tariffs rose by 1.65%.
Most Impacted Products
Products with Rising Prices
According to Inegi data, these were the five products with the most significant price increases affecting Mexicans:
- Lunch counters, fondas, torterías, and taquerias: 0.38%
- Own homes: 0.14%
- Beef: 0.50%
- University: 1.11%
- Serrano chili peppers: 12.87%
Products with Falling Prices
The following products with decreasing prices provided the most relief during the quincena:
- Cinema: -10.01%
- Tomatoes: -8.78%
- Air transportation: -8.42%
- Chicken: -2.47%
- Eggs: -1.30%
Key Questions and Answers
- What is the current inflation rate in Mexico? The consumer inflation rate in Mexico was 3.49% annually in the first half of August.
- How does this compare to previous periods? This marks a slight acceleration from the 3.48% inflation rate in the previous quincena.
- What did market expectations predict? Market expectations anticipated a higher annual inflation rate of 3.66%, according to a Reuters survey.
- Where does inflation stand relative to Banxico’s target? Inflation remains within Banxico’s 3% ±1 percentage point target range.
- What is the current interest rate in Mexico? The Bank of Mexico’s interest rate is currently at 7.75%, following a recent 25 basis point reduction.
- What is subyacente inflation, and how does it differ from non-subyacente inflation? Subyacente inflation excludes more volatile goods and services, while non-subyacente inflation includes them. Subyacente inflation is the metric Banxico considers for monetary policy decisions.
