February Sees Drop in Mexico’s Inflation, Rate Cut Expected

In February 2024, Mexico’s inflation drop aligned with expectations, hinting at likely interest rate cuts by Banxico on March 21.

The National Consumer Price Index (INPC) slightly increased by 0.09% from January, bringing the yearly inflation rate to 4.4%, reports the National Institute of Statistics and Geography (Inegi).

The Citibanamex survey expected this inflation rate to decline from previous months’ spikes, particularly due to January’s high vegetable prices.

This rate, the lowest for February since 2021, contrasts with February 2023’s monthly inflation of 0.56% and the yearly rate of 7.62%.

Analysts largely believe Banxico will cut the interest rate in its upcoming March meeting.

The Citibanamex survey reveals that 33 out of 35 analysts predict a March rate cut, suggesting a 25 basis point reduction to bring the rate down to 11% from 11.25%.

Core inflation, important for Banxico’s policy decisions, rose to 0.49% monthly and 4.64% annually.

Within this, merchandise prices increased by 0.40% and services by 0.61%, leading to annual rates of 4.11% for goods and 5.3% for services.

This core inflation matches market expectations and marks the lowest in 13 months, paving the way for a potential rate cut.

Inflation trends

Meanwhile, non-core inflation, which includes volatile items, fell by 1.1% monthly while climbing 3.67% annually.

Here, agricultural prices dropped by 4.6%, but energy and regulated tariffs went up by 2.12%. Yet, annual inflation for fruits and vegetables remains high at 15%.

Significant price changes in February included cucumbers rising by 30.31%, LP gas by 10.16%, and onions by 8.64%.

Conversely, notable monthly price drops were seen in tomatoes, green tomatoes, and poblano peppers.

This trend and expected rate cut show the central bank’s response to economic conditions, balancing growth and inflation control.