PUERTO VALLARTA (PVDN) – The latest data from the National Institute of Statistics and Geography (INEGI) showed on Wednesday that Mexico’s annual inflation rate slowed for the sixth consecutive month in July to 4.79%, marking a continued downward trend due to a prolonged cycle of interest rate hikes.
The headline inflation figure came in at exactly what market forecasters predicted at 4.79%, the lowest in more than two years. It’s a dramatic improvement from last year’s record high of 8.7%.
Consumer prices in Mexico rose by 0.48% in July from June, according to non-seasonally adjusted figures. This increase occurred against an expected drop of 0.49%.
The core price index, which removes some of the volatile food and energy prices, rose 0.39% during the month. The annual core inflation rate in July, seen as a more accurate gauge of price trends as it excludes highly volatile items, was 6.64%, below the expected 6.68% and the lowest since February 2022.
Mexico’s central bank member Jonathan Heath mentioned in a recent podcast that he believed the benchmark interest rate was at the correct level and the central bank had no intention of raising it again, even in the face of potential U.S. rate hikes.
Jason Tuvey, Deputy Chief Emerging Markets Economist at Capital Economics, noted that although the headline inflation rate continues to drop, “services inflation is proving to be sticky.” He does not foresee the central bank turning to interest rate cuts until the new year.
Andres Abadia, Chief Latin America Economist at Pantheon Macroeconomics, attributed the fall in underlying inflation pressures to factors such as the “solid performance of the Mexican peso over the last few quarters, falling inflation expectations, and low input costs.” These factors, he said, would allow policymakers to reduce rates from the fourth quarter onwards.
The Bank of Mexico, with an inflation target of 3% plus or minus one percentage point, voted in late June to maintain its benchmark interest rate at a historic high of 11.25%. This suggests the bank might need to keep it at that level for an extended period as it works to bring inflation down to its target.
The Mexican central bank is set to announce its next interest rate decision on Thursday. This decision could signal the future direction of monetary policy in the country and will be closely watched by economists and market participants. The current stability in rates, coupled with a slowing inflation trend, may herald a new phase in Mexico’s economic policy, potentially allowing for rate cuts and easing of monetary policy in the near future.
PUERTO VALLARTA (PVDN) - The latest data from the National Institute of Statistics and Geography (INEGI) showed on Wednesday that Mexico's annual inflation rate . . .
