Mexico’s Inflation Rate and Interest Rates

MEXICO CITY (Reuters) – Mexico’s annual inflation rate likely fell in December, according to a Reuters poll of analysts conducted on Tuesday. This decline is fueling speculation that the central bank will continue to reduce its benchmark interest rate, potentially by a larger margin than in recent decisions.

The median estimate from 12 analysts indicated that December’s annual headline inflation rate may drop to 4.28%, its lowest since October 2023, yet still above the central bank’s official target rate of 3%, plus or minus a percentage point.

Core inflation, which excludes particularly volatile food and energy prices, is expected to have risen slightly in December to 3.62%, following a 22-month decline.

In December, the central bank implemented a 25-basis-point cut to its benchmark interest rate, marking its fifth reduction in 2024, bringing the rate down to 10.00%. The governing board noted that, given progress on disinflation, larger downward adjustments may be considered in future meetings.

In a recent interview with Reuters, Deputy Governor Jonathan Heath mentioned that the central bank’s governing board might discuss a potential cut of up to 50 basis points in its first decision of 2025, scheduled for February 6.

For December, consumer prices are projected to have increased by 0.40% from the previous month, while core prices are expected to rise by 0.45%, according to the poll. The INEGI, Mexico’s national statistics institute, will release official consumer price data for December on Thursday.