Overview of Inflation Trends in Mexico
In October, consumer inflation in Mexico eased once again, according to data from the National Institute of Statistics and Geography (Inegi). However, underlying inflation remained above the Banco de México (Banxico) target, signaling continued economic challenges.
Monthly and Annual Inflation Figures
The National Consumer Price Index (INPC) reported a monthly variation of 0.36% in October, while the annual inflation rate was at 3.57%. This break from three consecutive acceleration months keeps the inflation rate within Banxico’s target range of 3% ±1 percentage point.
Market Expectations and Analyst Insights
The October inflation figure was slightly above market expectations, with Reuters predicting an annual inflation rate of 3.56%. Monex noted a mixed outlook, with general inflation moderating but underlying inflation remaining persistently high due to fewer supply shocks in the agricultural sector compared to 2024.
Economist Perspectives
Alejandro Saldaña, Chief Economist at Ve por Más (Bx+), expects general inflation to stay below 4% due to slow economic growth. However, he acknowledges that the current situation remains complex as Banxico has reached a neutral stance, suggesting more cautious monetary policy actions in upcoming meetings.
Services and Goods Inflation
According to Inegi data, the services sector was the primary driver of inflation in October, pushing underlying inflation above the general inflation rate. The annual underlying inflation rate stood at 4.28%, remaining above Banxico’s target range for the sixth consecutive month.
- Goods: Goods inflation rose by 4.12% in October.
- Services: Services inflation increased by 4.44%.
Saldaña explained that services, particularly non-education and non-housing services, have shown more erratic behavior recently, with growth rates significantly above their historical average despite low economic growth.
Non-Underlying Inflation
The non-underlying inflation rate in October was 1.18%, with agricultural products increasing by only 0.10% due to a 10.27% drop in fruit and vegetable prices. Energetics and government-authorized tariffs saw an annual inflation rate of 2.07%.
Volatility and Policy Implications
Although the non-underlying index is much lower than the general inflation rate, analysts warn that external tensions and volatile weather conditions could still cause new shocks. Banxico typically does not consider the non-underlying component for monetary policy due to its high volatility, driven by external or temporary factors rather than persistent inflationary pressures.
