Factors Affecting Mexican Inflation
‘Tis the season of change, and Mexico’s headline inflation rate is not immune to its winds. According to a Reuters poll data released on Monday, Mexico’s headline inflation is anticipated to have taken a breather in the first half of February. This anticipated slowdown reinforces the assertion that the country’s central bank may soon consider lowering its key benchmark interest rate for the first time since the year of our Lord, 2021.
Analyst Predictions and Data
A median forecast involving 13 analysts reveals that the annual headline inflation rate may have settled at 4.70% during the first 15 days of February. This projection suggests a continuation of the downward trend that briefly wavered at the end of last year. However, this anticipated rate still lingers above the central bank’s target of 3%, plus or minus 1 percentage point.
The closely watched core inflation index, which excludes volatile energy and food prices, is expected to diminish to 4.67% in early February. This would mark its lowest level since July 2021. The Bank of Mexico’s five-member board remained firm in its decision to maintain the benchmark interest rate at 11.25% for a seventh consecutive occasion during the latest meeting. However, they hinted at the possibility of a rate cut in the upcoming meetings.
Rate Cut Expectations and Market Predispositions
The central bank, more colloquially known as Banxico, embarked on a rate hiking cycle in June 2021. However, it has steadfastly upheld the key borrowing rate at its current record-high level since last March. A recent Citibanamex survey has unveiled that a substantial portion of the market foresees a rate cut at the next monetary policy announcement scheduled for March 21.
Insight into Consumer Prices
Mexico’s consumer prices are predicted to have risen by 0.15% on a month-over-month basis in the first half of February, with core inflation marking an increase of 0.28%. The national statistics agency of Mexico is set to release the official inflation data for the first half of February on Thursday.
(Reporting by Noe Torres; Additional reporting by Gabriel Burin; Editing by Sandra Maler)
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