Mexico City - Mexico's inflation rate in July showed a slowdown, primarily due to declining energy costs, although there were increases in certain services and fresh produce prices. According to the National Statistics Institute, the consumer price index rose by 0.48% last month, marking a 4.79% increase from the same period the previous year. This is a decrease compared to the 5.06% growth recorded at the end of June.
Core CPI, which excludes volatile energy and agricultural product prices, increased by 0.39% in July. As a result, the 12-month rate fell from 6.88% in June to 6.64%. Energy costs were down by 7.82% compared to the previous year, while fresh fruit and vegetable prices saw a rise of 7.14%. Services inflation remained relatively steady at 5.24% in July, similar to June, with vacation packages and airfares contributing to the increase.
The recent easing of inflation has prompted the Bank of Mexico to halt its cycle of interest-rate increases, which had been ongoing for almost two years. The central bank maintained its overnight interest-rate target at 11.25% in both May and June and is expected to keep it unchanged at the upcoming meeting on Thursday.
The Bank of Mexico has emphasized its intention to keep interest rates at their current level for an extended period. It foresees that it will take until the fourth quarter of 2024 for inflation to align with its target of 3%. Citigroup unit Citibanamex conducted a poll amongst multiple banks, and most of them predict that the Bank of Mexico will make its first interest-rate cut either in November or December.
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