Headline Inflation in Mexico Set to Rise Amid Expectations of Core Inflation Decline

Recent data suggests that Mexico's headline inflation is expected to rise in the first half of October, while core inflation, which excludes volatile items, is likely to continue its downward trend. Analysts predict the headline inflation rate will reach 4.67%, up from the 4.50% observed in the second half of September, marking the lowest rate since March. This increase is primarily attributed to the end of electricity subsidies, which typically result in higher tariffs outside the warm season.

Conversely, core inflation is anticipated to fall to 3.84%, reaching a new low since January 2021. During the first 15 days of October, headline prices are projected to have increased by 0.42% compared to the previous period, while core prices are expected to rise by 0.20%.

These trends follow the Bank of Mexico’s move last month to cut the benchmark interest rate by 25 basis points to 10.50%, marking the third rate cut in 2024. Minutes from the September meeting indicate that the bank's board is considering further rate adjustments in light of the gradual slowdown in inflation.

Two more monetary policy decisions are anticipated before the year ends, on November 14 and December 19. Market forecasts suggest the benchmark interest rate could drop to 10% by the end of 2024 and potentially to 8% by the end of 2025.

The national statistics agency, INEGI, is expected to release official inflation figures for the first half of October on Thursday. These figures are closely monitored as indicators of the country's economic health and are likely to influence upcoming central bank policy decisions.