Mexico inflation picks up for fifth consecutive month

Mexico’s headline inflation was 1.05% in July and rose to 5.57% on an annual basis from 4.98% in June, its highest level since May 2023 and the fifth consecutive monthly increase, according to statistics office Inegi.

“The pressures were observed mainly in the non-core component [food and energy], which has accumulated five consecutive months of acceleration,” said Gabriela Siller, director of economic analysis at Grupo Financiero Base, on her X account.

In July, non-core inflation was an annual 10.36%, the highest since August 2022 when it was 10.65%. “It stands out that this is the first time that non-core inflation registers double digits in its annual variation after 22 consecutive months of single-digit variations and even negative variations in two of those 22 months,” Siller said.

“Not surprisingly, inflation continued to rise in July, jumping above 5.5% largely driven by non-core prices. Core inflation moved slightly downward, but it is still above 4%,” Alfredo Coutiño, director of Moody's Analytics, said on X.

“Both inflations will end the year above 4%,” he added. Siller predicts headline inflation will be 4.95% this year.

Although Siller said non-core inflationary pressures are typically not of concern, since the component contains the products with the most volatile prices, "as the high inflation in this component is persistent, it threatens to put pressure on headline inflation in future."

Later on Thursday, the central bank is due to announce its next monetary policy move and the higher inflation reinforces expectations that there will be no cut in the base rate from the 11% where it has been since March.

“Inflationary conditions demand prudence and consistency with the mandate [to maintain price stability]. A rate cut today would be inconsistent and neglect the anti-inflationary mandate,” Coutiño added.