Mexico's Inflation Trends in October

MEXICO CITY (Reuters) – Headline inflation in Mexico likely accelerated in the first half of October, while core measures continued to ease, according to a Reuters poll on Monday, strengthening expectations that the central bank will further reduce its benchmark interest rate.

The median forecast from 10 analysts estimated headline inflation at 4.67% for the first half of the month, up from 4.50% in the previous two weeks, marking the lowest level since March.

Analysts attributed the increase primarily to a seasonal rise in electricity rates, as government subsidies for the hot season ended in certain cities.

However, the closely monitored core inflation index, which excludes volatile prices, is anticipated to drop to 3.84%, the lowest since January 2021.

In the first 15 days of October, headline prices increased by 0.42% compared to the previous 15-day period, while a 0.20% rise is expected for the core index, according to the poll.

Last month, the central bank reduced its benchmark interest rate by 25 basis points to 10.50%, marking its third policy easing of the year. The minutes from the September meeting indicated the board expects a gradual decline in inflation to support further rate adjustments in the future.

The Bank of Mexico has two more monetary policy meetings scheduled for the end of the year, on November 14 and December 19. Based on the latest survey of private sector analysts, the market expects the rate to end 2024 at 10% before decreasing to 8% by the end of next year.

Mexico's national statistics institute INEGI will release inflation data for the first half of October on Thursday.

(Report by Noe Torres; Additional reporting by Gabriel Burin; Writing by Aida Pelaez-Fernandez; Editing by Tomasz Janowski)