Mexico’s inflation rate rose in October due to increased fruit and vegetable prices, according to the national statistics agency INEGI. The headline inflation rate jumped to 4.76% in October, up from 4.58% in September, slightly exceeding analysts’ forecast of 4.73%. This increase comes after two months of declining annual rates and is being closely monitored by the Bank of Mexico (Banxico) ahead of an expected interest rate decision.
While overall inflation has risen, the annual core inflation rate, which excludes volatile food and energy prices, continued to decline for the 21st consecutive month, reaching 3.80%. This trend in core inflation could impact Banxico’s future monetary policy decisions, potentially leading to another rate cut. Banxico has already reduced its key rate three times this year, totaling a 75 basis point decrease and bringing the benchmark rate to 10.50%.
INEGI’s report highlighted a significant 15.90% year-over-year price increase for fruits and vegetables in October, the highest since July. This spike is attributed to fluctuating weather conditions affecting produce prices. Additionally, meat prices increased by 6.17% annually, contributing to an overall 10.92% rise in agricultural product prices, which includes fruits, vegetables, and meat. The report also mentioned a 4.98% inflation rate for services and a 4.62% increase in energy prices, driven by the discontinuation of summertime electricity subsidies in various cities.
Looking ahead, Andrés Abadía, chief Latin America economist at Pantheon Macroeconomics, predicts a potential decrease in inflation rates in the final quarter of 2024. He cited factors such as improved supply chain conditions and favorable climate patterns as reasons for this outlook. Citibanamex’s surveyed analysts also anticipate a year-end headline inflation rate of 4.41% for Mexico.
Overall, the rise in inflation in October was primarily driven by increased fruit and vegetable prices, as well as higher meat prices and energy costs. The impact of these price hikes on the overall economy and consumers will be closely monitored by both analysts and policymakers in the coming months.