Mexican Inflation Trends and Central Bank Reactions

BUENOS AIRES/MEXICO CITY (Reuters) – Mexican headline inflation likely eased in June after rising for four straight months, although core inflation is expected to keep climbing. This scenario fuels expectations that the central bank will slow the pace of interest rate cuts, according to a Reuters poll from Tuesday.

The median forecast from 17 analysts projected an annual headline inflation rate of 4.31% for June, down from 4.42% in May, yet still above the official target of 3%, plus or minus one percentage point.

In contrast, core inflation, considered a better measure of price trends as it excludes volatile items, is estimated to have accelerated to 4.22%, its highest since April last year.

On a monthly basis, consumer prices were expected to rise 0.27%, while core prices were forecast to increase by 0.38%, according to the survey. Official data is set to be released on Wednesday.

At the end of June, the Bank of Mexico cut its benchmark rate by 50 basis points for the fourth consecutive time in an easing cycle that began in 2024 after rates reached a record high.

However, the central bank’s latest statement adjusted forward guidance, omitting previous references to additional 50 basis point cuts, indicating the board would evaluate “additional cuts” moving forward.

Markets interpreted this tone change as a signal for the central bank to potentially reduce the pace of monetary easing at its next meeting on August 7.

A Citi survey published this week indicated a consensus for a 25 basis point cut in August.