Home News Mexico’s Inflation Drops to Lowest Level in Over Two Years

Mexico’s Inflation Drops to Lowest Level in Over Two Years

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Overview

Mexico’s inflation rate dipped to its lowest level since March 2021 in June, largely due to decreased energy and fresh produce costs. The consumer price index (CPI) rose by 0.10% last month, with the 12-month inflation rate falling to 5.06% from 5.84% in May, according to the National Statistics Institute.

Factors Affecting Inflation

Energy prices experienced a decline of 1.2% in June, while agricultural prices dropped by 0.24% compared to the previous month. However, core CPI, which excludes volatile energy and agricultural prices but considers processed food, rose by 0.30% in June. The core CPI was up 6.89% from the previous year, slightly lower than the 7.39% annual rate recorded in May.

Bank of Mexico’s Response

Encouraged by the decline in inflation, the Bank of Mexico has maintained its interest rates at 11.25% for the past two meetings. The central bank plans to keep this reference rate unchanged for an extended period to bring inflation back to its target rate of 3%.

Future Outlook

While headline inflation is anticipated to continue decreasing in the coming months, experts believe it will be a gradual process. Rapid wage growth is a crucial factor contributing to elevated services inflation, which is expected to persist at uncomfortably high levels.

Interest Rate Cut Predictions

A recent poll conducted by Citigroup unit Citibanamex revealed that most banks anticipate the Bank of Mexico to implement its first interest-rate cut either in November or December.

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