Inflation in Mexico continued to decelerate in October, marking its ninth consecutive month of slowing. While energy costs saw a modest increase, lower produce prices partially offset this rise.
According to the National Statistics Institute, the consumer price index rose by 0.38% compared to the end of September. This pushed the 12-month inflation rate down to 4.26% from 4.45% in September.
In October, the core consumer price index (CPI), which excludes energy and agricultural prices, rose by 0.39%. On a year-over-year basis, it was up by 5.50%, compared with a 12-month rate of 5.76% in September.
The main driver of October’s inflation was electricity, which saw a 19% increase from the previous month. This was due to the end of summertime subsidies on residential rates in several cities. However, the higher energy costs were partially offset by a decline in fresh fruit and vegetable prices.
Later today, the Bank of Mexico is expected to maintain its reference interest rate at 11.25%. Despite the slowdown in the rate of cost-of-living increases, the bank does not anticipate inflation reaching its 3% target until the second quarter of 2025.
As inflation, particularly core inflation, gradually eases as projected and economic activity slows, analysts at Citibank unit Citibanamex believe that “the Bank of Mexico will likely have the opportunity to begin a cycle of rate cuts starting with a reduction of 25 basis points in March of 2024.”