Mexico’s headline inflation likely eased in June after four consecutive monthly increases, but core inflation is expected to have continued rising, suggesting the central bank may slow down its interest rate cuts, according to the findings from a Reuters news agency poll released on Tuesday.
The median estimate from 17 analysts points to a year-over-year headline inflation rate of 4.31% for June, slightly lower than May’s 4.42%, yet still above the official 3% target range, plus or minus one percentage point.
Whereas core inflation, which is considered a more reliable indicator of underlying price trends since it excludes volatile items, was expected to have risen further to 4.22%, marking its highest level since April of last year, Reuters reports.
Monthly consumer prices were projected to increase by 0.27%, with core prices forecast to climb 0.38%, according to the survey. The official figures are set to be released on Wednesday.
At the end of June, the Bank of Mexico lowered its benchmark interest rate by 50 basis points for the fourth straight time, extending the easing cycle that started in 2024 after rates hit a record high.
However, in its most recent statement, the central bank’s board revised its forward guidance, removing earlier mentions of further 50 basis point reductions. Instead, it indicated that it will continue to evaluate the possibility of “additional cuts.”
Markets have taken the central bank’s shift in language as an indication that the pace of monetary easing could slow down at the upcoming policy meeting scheduled for 7th August. This more cautious tone suggests that while further rate cuts are still on the table, they may come in smaller increments or at a more measured pace compared to previous reductions.
Supporting this view, a recent survey conducted by Citi revealed a broad consensus among analysts and market participants anticipating a 25-basis point cut in August, rather than the larger 50-basis point reductions seen in prior meetings.