Key facts
- Mexico's annual inflation rate in July was 3.12%, the lowest in six years.
- The deceleration was driven by falling agricultural prices and easing core inflation.
- Core inflation slowed to 3.95%, within the central bank's target band.
- Government caps on gasoline and diesel prices helped stabilize energy costs.
Mexico's inflation rate decelerated to 3.12% in July, reaching a six-year low. This slowdown was primarily attributed to falling agricultural prices and a moderation in core inflation. The consumer price index (CPI) decreased from 3.37% in June, marking the fourth consecutive month of decline and aligning closely with analyst expectations.
July's headline inflation was significantly influenced by the non-core index, which saw prices contract by 3.34% annually, largely due to a decrease in agricultural goods. Despite favorable weather conditions supporting agriculture this year, the development of a strong El Nino phenomenon was noted.
Core inflation, excluding volatile food and energy prices, eased to 3.95% from 4.03% in June, continuing a six-month downward trend and falling within the central bank's 2-4% tolerance band. Services inflation also decreased, while housing inflation remained stable. Consumer goods inflation saw a third consecutive month of decline.
Mexico's energy price index edged lower, supported by government caps on gasoline and diesel prices. Banorte indicated that government policy would be crucial for energy price stability, with improved fuel price outlooks partly due to OPEC+'s decision to reverse production cuts.