The financial group’s forecasts indicate that inflation will end 2026 at 4.2%, which would be 6 years outside the Bank of Mexico’s objective. The most worrying thing, the economist pointed out, is that underlying inflation aims to close at 4.4%.
“Inflation for Banxico always converges to 3% in a certain number of quarters and always fails and is always moved forward or the convergence of inflation is postponed,” stated Ernesto Revilla.
The start of 2026 also poses challenges, with a one-time shock arising from increases in the IEPS, tariffs on imports from countries without a trade agreement and increases in the minimum wage. Revilla explained that the recent increases in the minimum wage can be transferred to a greater extent this year to inflation, given the reach to a greater number of workers.
In addition, he pointed out that the Bank of Mexico has had to consecutively adjust its inflation convergence expectations to the 3% objective (+/- 1 percentage point), which is interpreted as a communication problem that undermines confidence in the central bank’s forecasts. Likewise, he warned that medium and long-term inflation expectations are high.
“It seems like bad news to me that the Central Bank’s forecasts will no longer have much predictive power, that the market will not respect them as much,” added the expert.
Carlos Capistrán, Chief Economist for Latin America and Canada at Bank of America, also agreed on Banxico’s problems in containing inflation within the target range. And he pointed out that the persistence of high inflation in services can be linked to increases in salaries without a counterpart increase in productivity.
Bank of America expects four more interest rate cuts by the Bank of Mexico throughout the year, which would close in 2026 with a rate of 6%.
At the end of 2025, inflation slowed below market expectations, to 3.7% annually, however, the underlying index accelerated 4.33%, with increases in merchandise and persistence of high inflation in services. Core inflation is considered the best parameter for price expectations in the medium and long term. The Bank of Mexico is expected to restart its cuts in May, following caution stemming from tax increases in the first quarter.
