Mexican Inflation Ticks Up to 3.77% in February as Rate Cut Looms

Mexico’s inflation rate rose to 3.77% in February 2025 from January’s four-year low of 3.59%, the National Institute of Statistics and Geography (INEGI) reported Friday. The figure aligned with market expectations while remaining comfortably within Banxico’s target range of 2-4%.

Consumer prices increased 0.28% month-over-month in February, compared to 0.09% in the same month last year. Core inflation, which excludes volatile food and energy prices, held steady at 3.65%, down slightly from 3.66% in January.

Prices for goods continued to rise at 2.75%, matching January’s pace. Service costs showed marginal improvement, easing to 4.64% from 4.69%. Agricultural product prices helped moderate overall inflation, with tomato prices falling 29.12% and onion prices dropping 14.17%.

The Bank of Mexico cut its benchmark interest rate by half a percentage point to 9.5% on February 6. Analysts widely expect another 50 basis point reduction at the central bank’s March 27 meeting.

Gabriela Siller, economic analysis director at Banco Base, predicts Banxico will continue lowering rates throughout 2025. She forecasts a year-end benchmark rate of 8.5%, still leaving a restrictive real policy rate around 4.5%.

Mexico’s inflation closed 2024 at 4.21%, showing significant improvement from July’s annual peak of 5.57%. Financial institutions have adjusted their outlooks for 2025. BBVA projects general inflation will reach 3.2% by year-end, with core inflation at 3.4%.

Mexican Inflation Ticks Up to 3.77% in February as Rate Cut Looms

The inflation data arrives amid economic headwinds. Growth forecasts for Mexico have been revised downward to approximately 1% for 2025, reflecting weakening economic activity and labor market concerns.

Donald Trump announced yesterday the suspension of planned 25% tariffs on Mexican imports until early April. The proposed tariffs had posed a significant inflation risk for Mexico, potentially derailing the central bank’s monetary easing cycle.

Banxico expects inflation to converge to its 3.0% target by the third quarter of 2026, allowing for continued gradual monetary policy normalization.