Mexico’s headline inflation slowed in July to its lowest level since late 2020, although the closely watched core rate remained above the central bank’s official target.
These were the findings of the latest economic data released by the national statistics agency, INEGI. The figures were published ahead of the Bank of Mexico (Banxico)’s interest rate decision, with markets broadly expected the central bank to ease the pace of monetary loosening in Latin America’s second-largest economy.
Annual inflation in July reached 3.51%, down from 4.32% the previous month, marking the lowest level since December 2020. Economists surveyed by Reuters had forecast a rate of 3.53%.
Core inflation stood at 4.23%, slightly below June’s 4.24% and in line with market expectations. Considered a more reliable measure of underlying price trends, the core index excludes certain volatile food and energy prices.
It continued to exceed the central bank’s target of 3%, with a tolerance range of plus or minus one percentage point. In June, the bank lowered its benchmark rate by half a percentage point for the fourth consecutive time, bringing it to 8%.
The decision was not unanimous, as Deputy Governor Jonathan Heath voted to maintain the rate. According to minutes from that meeting, the four board members who supported the cut indicated that future moves could be more gradual.
“The latest inflation data paves the way for Banxico to deliver the clearly signalled 25-basis-point cut, to 7.75%,” explained Kimberley Sperrfechter, emerging markets economist at Capital Economics.
In July, consumer prices rose 0.27% on a non-seasonally adjusted basis. The core index increased by 0.31%. Both figures matched market expectations.
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