Mexico’s Inflation Eases

MEXICO CITY (Reuters) – Mexico’s year-on-year inflation likely eased in the first half of August, according to a Reuters poll released on Monday. This development strengthens the argument for the central bank to consider cutting its key interest rate again in their upcoming meeting next month.

The median forecast from 10 analysts estimated inflation for the first two weeks of August at 5.33%, down from 5.52% in the latter half of July, though still far from the central bank’s target of 3% ± 1%.

Analysts predict a slight decrease in the core inflation index, which excludes highly volatile products, from 4.08% to 4.04%.

Earlier in August, the Bank of Mexico (Banxico) reduced its benchmark interest rate by 25 basis points, bringing it to 10.75%. This decision was made in a split vote by the governing board. Deputy Governor Jonathan Heath, one of the two board members who opposed the cut, remarked at an event recently that “the moment is already around the corner when we can lower rates more systematically.”

Banxico’s next monetary policy announcement is set for September 26, following the U.S. Federal Reserve meeting, where a series of anticipated rate cuts may begin.

In the first 15 days of August, headline prices likely increased by 0.13% compared to the previous 15 days, while an increase of 0.19% is expected for the core index, based on the poll. Mexico’s national statistics institute INEGI is scheduled to publish inflation data for the first half of August on Thursday.