Mexico's July inflation eases to slowest pace since 2020

Mexico's annual inflation eased to 3.12% in July, the slowest pace in more than six years, according to data released by the national statistics agency INEGI on Friday. The reading was down from 3.37% in June and matched the median forecast in a poll of economists.

The figure remains comfortably within the Bank of Mexico's target band of 3%, plus or minus one percentage point. The slowdown comes a day after the central bank held its benchmark interest rate at 6.5%, extending a pause that began in June.

In its policy statement, Banxico said both headline and core inflation were still expected to decline over its forecast horizon, though at a slower pace than previously anticipated. The bank projects headline inflation to converge to 3% in the fourth quarter of 2027.

"The key story here is that disinflation remains on track, but the final stage is likely to prove gradual," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. "Nothing in today's report changes our policy outlook. Inflation continues to evolve broadly in line with Banxico's expectations, supporting the board's decision to remain on hold."

On a monthly basis, consumer prices rose 0.03% in July, in line with expectations. Core inflation, which excludes volatile food and energy prices, stood at 3.95% year-on-year, slightly above the 3.94% forecast, while monthly core prices rose 0.23% against an expected 0.22%.