Mexico’s Inflation Outlook

MEXICO CITY (Reuters) – Mexico’s annual inflation likely continued to moderate in the first half of September, according to a Reuters poll of analysts conducted on Monday. This development raises expectations that the central bank may cut its benchmark interest rate again in its upcoming announcement this week.

The median estimate from 11 analysts predicts that the overall consumer price index (CPI) will decrease to 4.73%, marking its fourth consecutive fortnight of decline. However, this figure remains above the official target of 3%, plus or minus a percentage point.

Meanwhile, the core inflation index, excluding volatile products for a clearer price trend, is expected to drop to 3.97%, the lowest level since February 2021.

For the first 15 days of September, price growth was estimated at 0.15% compared to the previous two weeks, with core prices increasing by 0.23%, as per the Reuters poll.

In early August, the central bank’s board reduced its benchmark interest rate by 25 basis points in a divided vote, anticipating that inflationary conditions would permit discussions of greater monetary easing.

The Bank of Mexico will announce its next monetary policy decision on Thursday, shortly after the Federal Reserve initiated an aggressive half-percentage-point rate cut to ease its monetary policy, setting the stage for the Mexican central bank to lower interest rates again.

Additionally, the National Statistics Institute (INEGI) will release consumer price data for the first half of September on Tuesday.