Mexico Inflation Ticks Up as Banxico Weighs Next Rate Move

Mexico’s annual inflation accelerated more than expected in early October, putting pressure on central bankers meeting next month to reconsider a five-month hold on interest rates.

Consumer price increases sped up 3.62% in the first two weeks of October compared with the same period the year before, the national statistics institute reported Thursday. The reading came in above the 3.59% median estimate of analysts surveyed by Bloomberg, and up from the 3.49% print in late September.

Core inflation, which excludes volatile food and fuel prices, also accelerated to 3.78% from a year ago, above the 3.70% median estimate from analysts and up from the 3.71% print in late September. The central bank targets 3% inflation, plus or minus one percentage point.

Last month, the central bank kept its benchmark interest rate unchanged at 6.5% for the third straight meeting as it evaluates whether a recent slowdown in inflation will continue.

Policymakers dropped previous guidance suggesting they’d likely keep borrowing costs on hold going forward, instead shifting toward a more data-driven stance. The bank, which has kept the rate unchanged since June, will hold its next rate setting meeting on Nov. 5.

The bank known as Banxico said in the minutes of its September decision that trade uncertainty and the escalation of war in the Middle East are the main drivers of consumer price increases.

Despite seeing the balance of risks tilted to the upside, the bank still forecasts that inflation will converge back to its target in the last quarter of 2027.