Overview and Relevance
The Mexican consumer inflation reported a slowdown during the first half of June, following a rise in the previous month, according to data released by Mexico’s National Institute of Statistics and Geography (Inegi). This development is significant as it impacts the Mexican economy and the purchasing power of its citizens.
Inflation Details
The National Consumer Price Index (INPC) reported a quinzenal variation of 0.10% and an annual inflation rate of 4.51%. This slowdown comes after two quinzenas in May that saw increases, though inflation remains above the Banco de México’s (Banxico) target range of 3% ±1 percentage point.
Market Expectations
The recent appreciation of the Mexican peso and relatively low oil prices have helped anchor inflation. The economic slowdown and restrictive financial conditions are expected to limit inflation in the second half of the year, assuming the peso remains stable and geopolitical risks subside. Andrés Abadía, Chief Economist for Latin America at Pantheon Macroeconomics, stated that he anticipates Banxico will further reduce its interest rate by 50 basis points in their upcoming meeting, bringing it down to 8%. However, he noted that this decision may not be unanimous.
Price Increases in Fruits and Vegetables
According to Inegi’s report, the component that showed the highest annual increase during this period was fruits and vegetables within non-core inflation.
- The annual inflation for fruits and vegetables was 17.28% compared to the same period last year.
- The energy and government-authorized tariffs had an annual inflation rate of 4.74%.
Non-core inflation, which excludes more volatile goods and services and is the basis for Banxico’s monetary policy decisions, reported a level of 4.20% in the first half of the month.
- Goods prices increased by 3.84%.
- Services rose by 5.19% annually.
Most Impactful Price Increases
Inegi’s report indicates that the component most affecting Mexican consumers’ wallets during the first half of June was the rise in the price of owned housing.
- Owned housing increased by 0.17%.
- Air travel rose by 9.87%, and street food establishments (loncherías, fondas, torterías, and taquerías) increased by 0.41%.
Key Questions and Answers
- What is the current inflation rate in Mexico? The consumer inflation rate in Mexico slowed to 4.51% in the first half of June.
- What factors are contributing to the slowdown in inflation? The recent appreciation of the Mexican peso and relatively low oil prices have helped anchor inflation. Additionally, economic slowdown and restrictive financial conditions are expected to limit inflation in the second half of the year.
- Which goods and services saw the most significant price increases? Fruits and vegetables experienced a substantial increase of 17.28% annually, while air travel prices rose by 9.87% quinzenally.
