Despite a slower pace, inflation is still above the Mexican central bank’s target; Bank of Mexico (Banxico) which is 3%, plus or minus one percentage point. Therefore, this index is set to be 45 months out of the range, at the end of 2024.
Inflation has been off target since April 2021 and is expected to remain that way until 2026. This is the longest inflationary period in Mexico’s recent history.
An analysis by Capital Economics highlighted that the drop in Mexican inflation in the first half of December gives Banco de México room to continue relaxing monetary policy. “But we expect him to continue cutting at a rate of 25 basis points, instead of accelerating the pace as he hinted at in his most recent meeting last week,” he explained.
Meanwhile, Citibanamex estimates that inflation will follow a gradual downward trend, and maintains its estimate for general annual and underlying inflation at the end of 2024 at 4.4% and 3.8%, respectively, and for 2025 at 3.9% and 3.7%, respectively.
Meanwhile, core inflation, considered a better parameter to measure the trajectory of prices because it eliminates highly volatile products, unexpectedly advanced to 3.62% from 3.57% in the second half of November. The market expected it to decrease to 3.56%.
Within the underlying indicator, the prices of education services (tuitions) were the ones that drove this growth the most with 5.79% annually, while food, beverages and tobacco showed growth of 3.59% annually.
In the non-core indicator, fruits and vegetables increased the most with 11.23% annually, followed by energy prices, which reported an increase of 5.91%.
The items that suffered the most increases in the fortnight were air transport and tomatoes, while papaya and onion were the ones that fell the most.
With information from Reuters.
