Mexico Headline Inflation Higher In January

Mexico Headline Inflation Higher In January by Adam Rosen last updated on February 25, 2024

Mexico's Headline Inflation Reached 4.9% In Early January

The latest data from Mexican officials shows that the headline inflation continues to rise upwards with no end in sight. If this trend continues throughout January, the markets can forget about any rate cut in the short term.

Data shows that from 1 Jan - 15 Jan, the inflation in Mexico was 4.90%, which is higher than the central bank's target. Just a month ago, the headline inflation was near 4.66%, which suggests upside price pressure. In addition, even the economists were only citing an inflation reading of 4.78%.

Agricultural Products Led To Higher Inflation

senior economist added that the uptick in headline inflation was driven by an increase in the prices of agricultural goods. He also commented that the recent inflation reading means the chances of the next rate cut now stand at only 50%.

Another expert added that the prices of perishable food items have increased during the first half of January. As a result, a sharp increase in the headline figure was noted. As for what caused an increase in food prices, the expert attributed it to bad weather and high energy prices.

The uptrend in inflation has been seen even during November & December. This has forced the Bank of Mexico to adopt a more cautious approach and has been shying away from lowering the interest rate.

0.25% jump was seen in the core inflation index, which doesn't account for food and energy prices. If we look at the core inflation rate annually, it now sits at 4.78%.

Given all of this, some experts believe that 2024 will send inflation lower. As for when that's expected, he added that it will likely happen during the 2nd half of 2024.

Although the chances of rate cuts have gone down, some still believe that March's meeting will result in a rate cut from the Bank of Mexico.

If the current trend in inflation continues and the central bank goes ahead with a rate cut, it could further fuel the inflation index higher.