Mexico’s inflation rate rises to 3.26% in August, ending 4-month decline

Mexico's annual inflation rate increased slightly in August, reversing a four-month downward trend, the national statistics agency INEGI reported on Wednesday. The headline inflation rate stood at 3.26% in August, up from 3.12% in July. Monthly inflation, however, remained low at 0.20%. The core inflation rate, which excludes food and energy prices, decreased from 3.95% to 3.88% in the same period.

Both rates were close to the median forecasts of surveyed analysts. The rise in the annual headline rate occurred after a month-over-month decline in inflation for four consecutive months, reducing the rate from 4.59% in March to 3.12% in July. The Bank of Mexico (Banxico) cut its benchmark interest rate twice in March and May, lowering it from 6.75% to 6.50%.

The central bank, targeting 3% inflation, is unlikely to further reduce the rate this year. Banxico projects inflation to stabilize at 3.5% by the end of 2026, with the headline rate gradually falling to its target by the last quarter of next year. Services inflation was the highest among the four categories monitored by INEGI, with a 4.33% annual increase in August, driven by a 6.04% rise in education fees due to the start of the school year.