Key facts
- Mexico's annual inflation slowed to 3.12% in July, the lowest since May 2020.
- Core inflation fell to 3.95% in the 12 months through July.
- Mexico's central bank held its benchmark interest rate steady at 6.50%.
- This marks an extension of the rate pause that began in June.
- Inflation is expected to continue easing, but at a slower pace than previously anticipated.
Mexico's annual inflation slowed to 3.12% in July, its lowest level since May 2020, according to data from statistics agency INEGI. The reading matched economists' expectations and remained within the Bank of Mexico's (Banxico) target range. This disinflationary trend is occurring as Banxico held its benchmark interest rate steady at 6.50%, extending a pause that began in June. The central bank anticipates that both headline and core inflation will continue to decline over its forecast horizon, albeit at a slower pace than previously expected. Headline inflation is projected to converge to 3% in the fourth quarter of 2027. Core inflation, which excludes volatile food and energy prices, stood at 3.95% in the 12 months through July, with monthly core prices rising 0.23%. Pantheon Macroeconomics' chief Latin America economist Andres Abadia noted that disinflation remains on track, but the final stage is likely to be gradual, supporting the board's decision to hold rates.
Consumer prices in July rose 0.03% from the previous month, matching forecasts. Economists had expected core inflation readings of 3.94% and 0.22% on a monthly basis, respectively. Analysts suggest that while inflation is easing, future minimum wage increases could prolong inflationary pressures in the services sector, and food prices might rebound towards the end of the year.