Overview and Background
Mexico’s consumer inflation has accelerated for the fourth consecutive month, slightly exceeding the Banco de México (Banxico) target range. The National Institute of Statistics and Geography (Inegi) released this information.
Who is Banco de México (Banxico)?
Banco de México is the country’s central bank, responsible for managing monetary policy and maintaining price stability. Its primary goal is to keep inflation within a target range of 3% ± 1 percentage point.
Inflation Details
The Consumer Price Index (CPI) reported a monthly variation of 0.28% in May, resulting in an annual inflation rate of 4.42%, according to Inegi.
Market Expectations and Analyst Projections
The market anticipated that inflation would accelerate and move outside Banxico’s target range. However, the actual data released by Inegi was lower than analysts’ projection of 4.39%.
Banxico’s Interest Rate Adjustment
In May of the previous year, Banxico reduced its interest rate by 50 basis points to 8.50%. Their next meeting is scheduled for June 26.
General Price Increase
Inegi’s report showed that both components of the CPI, namely the underlying and non-underlying inflation, increased in May.
Underlying Inflation
The underlying inflation, which excludes highly volatile goods and services and is used by Banxico for decision-making, stood at 4.06% annually in March, up from 3.93% the previous month.
- This marks the second consecutive month of acceleration for underlying inflation.
- Within underlying inflation, goods prices rose by 3.67% annually in May, while services saw a 4.49% increase.
Non-Underlying Inflation
The non-underlying inflation was recorded at 5.34% in May, up from 3.76% in April.
- The increase in non-underlying inflation was primarily due to a 6.76% annual rise in agricultural product prices and a 3.93% inflation rate for energy products and government-authorized tariffs.
Key Questions and Answers
- What is the Banco de México (Banxico) target range for inflation? The target is 3% ± 1 percentage point.
- What factors contributed to the recent acceleration in inflation? The rise was due to increased prices of agricultural products and energy, along with government-authorized tariffs.
- How did the market and analysts expect inflation to perform? Both anticipated that inflation would accelerate and move outside Banxico’s target range.
- What actions has Banxico taken regarding interest rates? In May of the previous year, Banxico reduced its interest rate by 50 basis points to 8.50%.
