In December 2024 the annual inflation rate in Mexico dropped to a near four-year low, 4.21%. This represents a notable decrease of 0.34% compared to 4.55%.
According to the Instituto Nacional de Estadistica y Geografia de Mexico (INEGI), the inflation rate is below market expectations. They had predicted a rate 4.28%.
The central bank’s target of 2% to 4.0% is not yet reached, so the current inflation rate remains above this range.
Slow price increases in key categories
The recent deceleration in price increases across several key consumer categories was one of the main drivers of the recent inflation respite.
The most important factor in household budgets is the price of food and non-alcoholic drinks. They grew by 4.36% in Decemeber, but a much higher rate of 6.03% in November.
This dramatic drop in prices is a sign that the government wants to bring order to food prices, even though there are supply chain issues and other economic disturbances.
The recreation and culture sector also faced some minor price issues with an annual increase of only 3.82% in the month of December, compared to 3.93% in the previous month.
The insurance and financial sector also had a remarkable decreasing price trend, with only a 3.78% increase, while November’s was a much higher 5.58 %.
This indicates that most prices have stabilized. It could also be that the government is slowly implementing its monetary policy to control inflation.
Core inflation increases without being noticed
The core inflation rate has risen surprisingly despite the overall decrease in inflation.
The core inflation rate is an annual rate of inflation excluding goods (foods and energy) with highly volatile prices. It increased to 3.65% by December.
This increase is above the market forecast, which was 3.62%. It also represents a recovery after a decline that had reached a four-and-a half-year low in November of 3.58%.
The core inflation rate is important for decision makers because it gives an idea of the long-term movements in prices that can be hidden by the general inflation figures.
The rise in core inflation raises the question of whether inflation pressure will continue or not.
This slight rise in core inflation may be a sign that fundamental inflation forces remain strong, and that the central bank will need to exercise strict oversight.
Monthly trends reveal modest growth
The Consumer Price Index (CPI), which measures the monthly change in prices, rose by 0.38%. This was almost in line the forecasts of a 0.40% increase.
The core Consumer Price Index increased slightly more, reaching 0.51 % while the market expected this figure to only be 0.45%.
These numbers indicate that even though the annual inflation rate may be decreasing, there may still be some price pressure.
Seasonal and cyclical factors would play a part in their development.
Focus on monetary policy
The Bank of Mexico is faced with a complex scenario as it tries to balance the need for economic growth and the need to curb inflation by implementing a monetary policy that is active.
Even though a decrease in overall inflation could be a positive for monetary policy, the rise in core inflation may require a cautious approach in future regarding interest rate changes.
The Bank of Mexico’s dual role is to maintain stable prices and create conditions for economic growth.
The bank’s actions in the coming months will be crucial, with the global economy in danger and the local labor market in controversy.
Mexico’s consumer price index has shown signs of relaxation. It has dropped to its lowest level in four years, but core inflation is still a problem.
The collaboration between the central bank and the government in their bid to reduce inflation will be closely monitored; the implications of such measures will also be thoroughly analyzed by experts and the general public.
To achieve stability and sustainable growth, it is important to carefully assess the trajectory of Mexico’s economic system.
This post Mexico inflation drops at 4.21%, approaching 4-year record low may be updated as new information becomes available
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