Mexico CPI (H1 Jun) Down before going up

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Mexico CPI (H1 Jun) Down before going up

Economics ● Mexico

24 June 2026

think the former will reverse in H2 2026, due to atypically low comparison bases and potential ‘El Niño’ effects on some crops, while

the latter could stay broadly unchanged, given fiscal measures to offset energy costs when international prices were higher. This

potential bounce, combined with core stickiness, will prompt inflation to resume an upward trend in July. For example, in today’s print,

the non-core component subtracted 0.26pps from the overall CPI and its annual rate stood at 1.61%, the lowest rate since H2

October 2025. Eight of the top ten prices with the largest downside impact belong to the non-core category. In contrast, seven from

the top ten prices with the largest upside effect belong to the core component. In fact, the annual rate of the core category stood at

4.12%.

In terms of monetary policy, we expect a quiet Banxico decision on 25 June, in which the policy rate, forward guidance and inflation

forecasts will remain unchanged. However, looking into H2 2026, we think Banxico will need to lift its inflation forecasts, as the

current ones show an unlikely scenario, in our view, (i.e. inflation average at 3.5% in Q4 2026). This would delay the convergence to

the central bank’s 3% target, currently forecasted for Q2 2027, thus making it difficult to see near-term rate cuts. However, even if

these revisions materialize and validate a more challenging outlook, we do not expect Banxico to discuss rate hikes any time soon,

despite market pricing. Our view is that market instruments may need to erase the hikes that are incorporated in the curve, given our

view of Banxico’s likely approach. As we recently indicated, we consider risks are biased to the downside, as Banxico could even