Mexico’s inflation rate continued its upward trajectory this Summer, marking the fourth consecutive month outside of the Bank of Mexico’s (Banxico) target range. The National Institute of Statistics and Geography (Inegi) reported a monthly increase of 0.38%, bringing the annual inflation rate to 4.98%.
This rise represents the highest level since June of the previous year and presents a challenge for Banxico, which aims to keep inflation within a target range of 3% plus or minus one percentage point. The central bank is expected to discuss this issue at its upcoming monetary policy meeting in August.
Non-Core Inflation Drives the Surge
The increase in inflation was primarily driven by non-core goods and services, particularly fruits and vegetables. Agricultural prices, especially for fruits and vegetables, saw significant increases, contributing to a 7.67% annual rise in non-core inflation.
Core Inflation Shows Signs of Moderation
While non-core inflation rose, core inflation, which excludes the most volatile goods and services, showed signs of deceleration in June. This is a positive indicator, suggesting some underlying stability in broader inflationary pressures.
Outlook and Implications
The persistent inflationary pressures underscore the challenges facing Mexico’s economy. The rising prices, particularly in essential sectors, pose difficulties for policymakers and consumers. The upcoming Banxico meeting will be crucial in determining the central bank’s response to these trends.
As inflation remains above the target range, Banxico’s strategies and measures to curb it will be closely watched. The interplay between domestic inflation and global economic conditions will play a significant role in shaping Mexico’s monetary policy in the coming months.
Written by Mexpat Realtors – October 2024
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