Mexico’s Inflation Quickens Past Forecasts

Mexico’s Inflation Quickens Past Forecasts

(Mexico’s statistics agency, cent)

Mexico’s inflation accelerated more than expected in early October, potentially complicating the central bank’s plan to keep cutting its benchmark interest rate next month.

Official data published Thursday showed consumer prices rose 4.69% in the first two weeks of October from the same period a year earlier, above the 4.66% median estimate of analysts surveyed by Bloomberg.

The closely-watched core inflation metric, which excludes volatile items such as food and fuel, slowed slightly to 3.87% from 3.88% in the prior reading, also above the 3.82% median estimate. The bank targets inflation of 3%, plus or minus 1 percentage point.

Banxico, as the central bank is known, voted to lower its key rate by a quarter-point to 10.5% at its Sept. 26 meeting as inflation cooled. In the minutes to that decision, policymakers said that external factors like slowdowns in both US inflation and activity, as well as Mexico’s own economic sluggishness, should allow the bank to continue easing at its Nov. 14 meeting.

The bank’s September decision was split, with Deputy Governor Jonathan Heath as the lone member voting to keep the rate at 10.75%. Heath has said Banxico should maintain a restrictive monetary policy stance so long as services prices remain elevated.

An overall slowdown in Latin America’s second-biggest economy has analysts and investors pricing in additional cuts. The central bank cut its growth forecast for this year to 1.5% from a previous estimate of 2.4%, and to 1.2% from 1.5% for 2025.

Economists in the most recent Citi survey published Tuesday reduced their 2024 inflation forecast to 4.40% from 4.44%, and to 3.80% from 3.81% for next year. Their prediction for 2024 economic growth matches the central bank’s 1.5% call, but they cut their growth projection for next year to 1% from 1.2%.