Introduction
Mexico's annual inflation rate is projected to have risen above the official target in May, complicating efforts by the central bank to reduce its key interest rate amid a weakening economy.Context
According to a Reuters poll, the median forecast from ten analysts indicates that the year-on-year headline inflation rate for May is expected to reach 4.39%, an increase from 3.93% in April. This rise signals escalating price pressures in the country.Developments
Core inflation, a more stable measure that excludes volatile food and energy prices, is also anticipated to have increased to 4.04%. The survey predicts that consumer prices rose by 0.23% from the previous month, while core prices may have increased by 0.27%. Official data is set to be released on Monday.The Bank of Mexico, with a target inflation rate of 3% (plus or minus one percentage point), has recently cut its benchmark interest rate by 50 basis points for the third consecutive time, bringing it down to 8.5%, the lowest level since 2022. In its statement, the central bank remarked that the current inflation landscape may enable it to continue lowering rates, potentially with additional cuts of similar magnitude. The next decision regarding monetary policy will occur on June 26.
Additionally, the bank acknowledged ongoing weaknesses in economic activity. Despite avoiding a technical recession in the first quarter, analysts caution that the economy remains at risk of contraction.