• Mexico: Inflation rises on year-on-year basis, but eases month-on-month


According to INEGI, July inflation continued to accelerate at 8.15% y/y, up from 7.99% in June (marginally above consensus of 8.14%) (chart 1). Core inflation increased to 7.65% y/y from 7.49% previously, which was also above consensus at 7.61%, with increases in merchandise goods 10.07% (9.91% previously), food, beverages and tobacco 12.09% (11.84%) and services of 4.90% (4.76%) (chart 2). Non-core inflation also accelerated, from 9.47% to 9.65% y/y, with increases in agricultural products 16.05% (15.02% previously), fruits and vegetables 16.16% (14.39%), while the pace of energy price and government tariff increases moderated to 4.76% (5.22%) (chart 3).

Chart 1: Mexico: Monthly Inflation & Its Main Components; Chart 2: Mexico: Core Goods & Services; Chart 3: Mexico: Non-Core Components Inflation

On a month-over-month basis, headline inflation slowed to 0.74% m/m from 0.84% m/m previously, but above the consensus of 0.73%. Core inflation also fell in June, to 0.62% m/m from 0.77% m/m, though was above the consensus of 0.58%, driven by an easing of price increases for merchandise goods 0.72% (1.0% previously), food, beverages and tobacco 1.02% (1.28%), non-food merchandise 0.38% (0.69%), and housing 0.27% (0.31%), while services remained at the same level at 0.50%. Finally, non-core inflation rose 1.09% m/m from 1.07% with a deceleration in agricultural 1.64% (1.76% previous) and livestock 1.06% (1.56%) insufficient to offset higher energy and government tariffs, which increased 0.63% (0.49%).

Despite the slight moderation in monthly inflation, it is still well above the Bank of Mexico’s target and will probably exceed the forecast figure for Q3-2022 published at the time of the June meeting (average 8.1% for headline inflation). We maintain our expectation of a 75 bps hike of the policy rate at Thursday’s decision, which currently stands at 7.75%.

—Brian Pérez