Mexican annual inflation accelerated slightly less than expected in September, validating the central bank’s current rate pause while awaiting greater clarity on the price outlook.
Consumer prices gained 3.45% in September compared with the same month last year, the national statistics institute reported Thursday. The reading came in just below the 3.47% median estimate of analysts surveyed by Bloomberg, and above August’s print of 3.26%.
Core inflation, which excludes volatile food and fuel prices, eased to 3.75% from a year ago. The closely-watched indicator came in just under the 3.78% median estimate from analysts and lower than August’s 3.88% print. The central bank targets 3% inflation, plus or minus one percentage point.
Banxico, as Mexico’s central bank is known, kept its benchmark interest rate unchanged at 6.5% for the third straight meeting last month, as policymakers dropped previous guidance suggesting they’d likely keep it on hold going forward. Its next rate decision will be announced Nov. 5.
What Bloomberg Economics Says
“Higher Mexican headline inflation in September highlights the risks posed by supply shocks, but doesn’t raise major concerns — the jump was mainly due to volatile food prices. Rather, a decelerating core shows pressures on that front are slowly fading. We expect inflation to continue slowing but remain above central bank forecasts and the midpoint of its target range through 2027.”
— Felipe Hernandez, Latin America economist
— Click here for full report
Future monetary policy decisions will depend on the evolution of economic conditions, including the exchange rate’s pass-through to consumer prices, the degree of slack in the economy as well as inflation expectations, Banxico Governor Victoria Rodríguez said in a recent interview .
“Our forecast remains in place and continues to show a gradual decline in inflation toward the target,” Rodríguez said. “Our monetary-policy stance has been — and will remain — consistent with that objective.”
Rodríguez added that while the Federal Reserve has recently adjusted its policy rate, US moves will not determine monetary policy in Mexico and Banxico should not be expected to “mechanically” change its rate in response.