Mexico’s Inflation Hits 3.57% in October, in Line With Outlook

Mexico's annual inflation rate slowed in October, reaching 3.57%, according to data from the National Institute of Statistics and Geography (INEGI). The figure matched the 3.56% median estimate from Bloomberg analysts and came just one day after the central bank announced its eleventh consecutive interest rate cut.

The year-over-year consumer price increase of 3.57% was lower than September’s 3.76%, keeping inflation within the Bank of Mexico’s (Banxico) target rate of 3% ±1 percentage point.

Core Inflation and Monetary Policy

Core inflation—which excludes volatile food and energy prices and serves as a key metric for Banxico—remained unchanged at 4.28% from the previous month.

On Thursday, Banxico cut its benchmark interest rate by 25 basis points to 7.25%. The decision was split, with board member Jonathan Heath, who has previously warned about persistent core inflation, voting to keep the rate unchanged.

Following the move, policymakers said they would “evaluate the possibility of reducing the reference rate,” removing previous references to “additional adjustments” and emphasizing that future decisions would depend on all factors influencing inflation.

Despite ongoing pressure from core prices, Banxico officials have repeatedly voiced concerns about the domestic economic slowdown, which is being compounded by potential US tariffs on Mexican exports.

Economic Slowdown and Trade Tensions

Mexico’s GDP contracted by 0.2% in the third quarter compared with the same period last year, according to preliminary data. The downturn strengthens the case for a longer monetary easing cycle aimed at stimulating growth.

Trade tensions also continue to weigh on the outlook. Last week, US President Donald Trump extended a pause on new tariffs he had threatened to impose on Mexican exports, raising hopes for progress toward a broader bilateral trade agreement. However, exports of steel, automobiles, and other goods not covered by the USMCA remain subject to existing U.S. tariffs.

In the non-core inflation component, electricity prices surged 17.65% month-on-month, driven by the end of a government subsidy program for electricity tariffs.