Mexico’s Inflation Hits 3.51%, Lowest Since 2020

Mexico’s annual inflation rate fell to 3.51% in July, its lowest level since December 2020, according to data from the National Institute of Statistics and Geography (INEGI).

The July report showed a monthly increase of 0.27% in the National Consumer Price Index (INPC), marking the second consecutive month of deceleration. The figure also came in below market expectations; analysts surveyed by Reuters had projected an annual rate of 3.53%.

With this latest reading, inflation has returned to the target range set by Mexico’s Central Bank (Banxico), which aims for 3% with a tolerance of plus or minus one percentage point.

The slowdown has strengthened expectations that Banxico may continue to ease interest rates. Last month, the bank cut the benchmark rate by 50 basis points to 8%, and a further 25-point reduction is anticipated later today.

Despite the overall decline, core inflation — a key indicator for Banxico that excludes volatile items such as food and energy — remained above target. The core index edged down slightly to 4.23% in July, from 4.24% in June.

Within the core category, goods prices rose 4.02% year over year, while services increased 4.44%.

The non-core component, which includes energy and agricultural products, posted a sharper slowdown, falling from 4.33% in June to 1.14% in July. Agricultural prices rose just 0.17% annually, while energy and government-regulated tariffs increased 1.97%.

The data suggest disinflationary pressures are continuing to build, though stubborn core inflation may influence the pace of further monetary easing by Banxico.