Mexico's Annual Inflation Falls to 3.37%, Nearing Central Bank Target

Mexico's annual headline inflation rate reached 3.37% in June, falling from 3.94% in May, as reported by the national statistics agency INEGI on Thursday. This figure places inflation just 0.37 percentage points above the Bank of Mexico's (Banxico) 3% target, marking the lowest rate for any month in Mexico since December 2020, when it stood at 3.15%.

This decline represents the third consecutive monthly fall in 2026, contrasting with increases observed in each month of the first quarter. Alfredo Coutiño, director for Latin America at Moody’s Analytics, attributed this trend to disinflation in volatile agricultural products and fuel prices. He noted that the decrease is largely due to the normalization of agricultural product supply, combined with price agreements between producers and the government, and stabilized fuel prices.

Annual core inflation, which excludes volatile fuel and energy prices, also decreased to 4.03% in June from 4.19% in May. Both the headline and core rates for June were lower than the median estimates provided by analysts surveyed by Bloomberg. On a month-over-month basis, consumer prices saw a 0.27% decrease in June, following a 0.21% decline in May, marking the second consecutive monthly drop. The El Economista newspaper reported that it was the first time in at least 10 years that inflation declined in June compared to May.

INEGI data indicated that prices for agricultural products were 1.72% lower in June compared to the previous year. Within this category, meat prices fell by 6.48% annually, while fruit and vegetable prices increased by 5.56%. Processed food, beverages, and tobacco experienced an annual inflation rate of 5.08%, and non-food goods rose by 2.24%. Services were 4.49% more expensive year-over-year, and energy prices, including electricity and gasoline, increased by 3.46%.

Compared to May, specific price movements included a nearly 39% drop for tomatoes and over 40% for poblano chilis in June. Other products seeing monthly price reductions included grapes (-18.96%), cucumbers (-10.13%), limes (-8.94%), and eggs (-7.21%). Conversely, prices for avocados increased by 24.53%, oranges by 9.55%, potatoes and other tubers by 9.32%, and onions by 6.87%.

Banxico projects an average headline inflation rate of 3.8% in the third quarter of 2026, 3.5% in the fourth quarter of 2026, and 3.2% in the first quarter of 2027. The central bank anticipates inflation will converge to its 3% target in the second quarter of next year. In late June, Banxico's board voted to maintain the benchmark interest rate at 6.50%, indicating it expects the rate to remain at this level in the near future. The central bank acknowledged that its inflation forecasts are subject to risks, including foreign trade policy disruptions, inflationary impacts from geopolitical conflicts, climate-related issues, and Mexican peso depreciation.

(Source: Mexico News Daily)