Has Mexico reined in its inflation rate? Not yet, says Banxico chief

In July, Mexico's inflation rate dipped to just 0.12 percentage points above the Bank of Mexico's 3% target, according to the national statistics agency INEGI. Inflation dropped to 3.12% from 3.37% in June, marking the lowest rate since May 2020. However, Bank of Mexico Governor Victoria Rodríguez Ceja told El Financiero that it is too early to declare victory in the battle against rising prices.

The central bank governor emphasized that while the July inflation rate was close to the 3% target, the Bank of Mexico will continue to pursue low and stable price rises.

The July annual inflation reading was a combination of 3.95% core inflation and 0.29% non-core inflation. Core inflation remained high due to factors like 4.85% year-over-year price increases for processed food and beverages, and 4.36% increases for services. Non-core inflation was low, primarily due to a 3.34% annual decline in agricultural product prices (fruit, vegetables, and meat) and a 3.31% rise in energy prices (electricity and gasoline). Additionally, agricultural product prices dropped by 1.51% on a month-over-month basis.

Rodríguez attributed the recent inflation decline to "changes in relative prices caused by favorable supply shocks," which refers to increased supply of fresh food and lower prices for such products. She also noted that the Bank of Mexico does not anticipate the lower prices for agricultural products will last due to their sensitivity to weather-related factors. Lower prices for agricultural products helped bring down inflation in July.