Mexico recorded a deceleration in its annual inflation rate in April, with the national figure moving down to 4.45% from 4.59% in March, according to official statistics released Thursday. The April result was slightly weaker than economist projections of a 4.50% rise recorded in a Reuters poll.
Measures that exclude volatile food and energy prices also showed moderation. The core inflation gauge slowed to 4.26% in April from 4.45% the previous month, registering just under the 4.27% increase that economists had expected.
Those developments come as Mexico’s central bank, Banco de M e9xico (Banxico), prepares to announce its next monetary policy decision on Thursday. In a move that surprised markets in March, Banxico trimmed its benchmark interest rate by 25 basis points to 6.75%.
Market participants have priced in an additional 25-basis-point reduction to the policy rate, which would likely mark the final cut in a monetary easing cycle that began more than two years ago. Despite the recent slowdown in headline and core inflation, the rate of price growth remains above Banxico’s formal target of 3%, which includes a tolerance band of one percentage point either side of that level.
The April inflation print and the central bank’s impending announcement are closely watched indicators for financial markets and rate-sensitive sectors. The data showing a modest easing in consumer price pressures arrives at a time when expectations about the trajectory of interest rates are already shaping market positioning.
Context and implications
- The headline inflation rate eased to 4.45% in April from 4.59% in March, under the 4.50% forecast from a Reuters poll.
- Core inflation, excluding food and energy, declined to 4.26% from 4.45%, slightly below the 4.27% forecast.
- Banxico is set to announce its policy decision Thursday; in March it unexpectedly cut the benchmark rate by 25 basis points to 6.75%.
- Markets are expecting a final 25-basis-point reduction to the benchmark rate, potentially concluding an easing cycle that began more than two years ago.
- Inflation remains above Banxico's 3% target, which allows a one percentage point tolerance either side.
Outlook considerations
With both headline and core inflation easing slightly but still above the central bank's target band, the upcoming Banxico decision is likely to be pivotal for future rate expectations. The data underline that price growth has softened compared with March, yet has not returned to target levels accepted by the central bank.