Mexico’s Inflation Exceeds Forecasts in 2023

In the closing months of 2023, Mexico experienced an unexpected rise in inflation, surpassing predictions by market experts and the Bank of Mexico (Banxico).

The National Consumer Price Index (INPC) increased by 0.71% in December, resulting in a 4.66% annual inflation rate, as reported by the stats agency Inegi.

Although this rate marked a deceleration from the 2022 peak of 7.82%, the highest in over twenty years, it was still the highest in the last five months of 2023.

The final inflation figure surpassed both market and Banxico forecasts.

Analysts from Citibanamex had anticipated a 4.55% closing rate, while Banxico and its analysts expected a 4.44% annual rate.

Core inflation, excluding food and energy, rose 0.44% monthly in December, ending the year at an annual 5.09%, the lowest since September 2021.

This core inflation was below the projections of Citibanamex analysts, who predicted a 5.14% rate, and Banxico’s expectation of 5.10%.

The year concluded with Banxico maintaining an interest rate of 11.25%, marking the sixth consecutive session without a change.

Central Bank governor Victoria Rodríguez Ceja hinted at a potential interest rate cut in early 2024, considering the ongoing disinflationary process.

Banxico maintains an interest rate of 11.25%

The non-core inflation segment, which includes volatile items, recorded a monthly increase of 1.53% and an annual rise of 3.39%.

Within this category, agricultural product prices and energy and government-authorized tariffs increased by 3.25% and 0.05% monthly, respectively.

Notably, annual rates in December showed a significant hike for fruits and vegetables, with inflation reaching 11.68%, nearly double the previous year’s figure.

Tomatoes and onions, with substantial monthly price rises, were major contributors to the INPC increase.

Other notable price increases in December included air transport, nopales, and various food and tourism services.

In contrast, several products like serrano chilies, carrots, and avocados saw price decreases.

This narrative outlines Mexico’s 2023 inflation trends, detailing unexpected rises, key contributors, and the central bank’s response to changing economic conditions.