According to data released today, Mexico’s annual inflation rate fell to its lowest level since early 2021, setting the stage for a possible fifth consecutive interest rate cut by the central bank.
Today’s report showed consumer prices increased by 4.21% year-over-year, just below the 4.22% median estimate from economists. Core inflation, which excludes volatile items like food and fuel, rose to 3.65%, slightly above the 3.64% estimate.
Banco de Mexico (Banxico), which cut the quarter-point rate in December, will meet on February 6 to discuss further rate cuts. One board member has hinted at further cuts, suggesting a possible reduction of 50 basis points from the current rate of 10%.
If Donald Trump follows through with a 25% tariff on imports from Mexico, Banxico Governor Victoria Rodriguez cautioned that it could harm economic activity and press costs down, although exchange rate fluctuations may lead to price increases, making inflation’s future uncertain. However, analysts speculate that Trump may be bluffing for better negotiation leverage on various issues.
Despite the impact of U.S. policy, Mexico’s economy is projected to weaken, with a Citi survey projecting only 1% GDP growth in 2025, contributing to a continued slowdown in inflation.
By CEO NA Editorial Staff
