Before the publication of the INPC, the Citi Expectations Survey anticipated for the first half of January a general inflation of 0.40% and underlying inflation of 0.47%, reflecting the expectation of upward pressures due to fiscal adjustments at the start of the year. In contrast, observed inflation was nine tenths below the consensus in the general variation, which suggests a more limited initial pass-through.
For the entire month of January, analysts expected general inflation of 3.92% in their annual comparison, which is why the result published by Inegi also fell below said expectation.
Core inflation reached 4.47% annually
The Inegi report shows that the underlying component increased 0.43% biweekly (4.47% annually), driven by merchandise, while the non-core component fell 0.12%, cushioning the general result.
Among the products with the greatest upward impact stood out cigarettes (12.22%) and packaged soft drinks (3.97%), both directly affected by the modifications to the IEPS. Even so, the decline in energy and some agriculture helped offset the fiscal shock.
According to various experts, the fiscal shocks at the beginning of the year will have one-time effects and are expected not to significantly alter the medium-term trajectory. Along these lines, the market continues to expect gradual cuts to the reference rate later in 2026.
According to market expectations for 2026, two additional cuts in the reference interest rate of the Bank of Mexico (Banxico) are anticipated throughout the year, each of 25 basis points, which would take the monetary policy rate from 7.00% to around 6.50% at the end of 2026.
However, Banxico is expected to pause before restarting cuts. In the last minute, the Governing Board indicated that “it will assess the moment to make additional adjustments to the reference rate”, due to the risks derived from the increase in the IEPS and the tariffs that will be applied throughout the year to countries without a trade agreement.
