Inflation in Mexico accelerated to 4.63% annually in the first half of March, reaching its highest level since October 2024, due to a rebound in fruit and vegetable prices. On a biweekly comparison, the National Consumer Price Index (INPC) increased by 0.62%, representing the largest rise for the same period since 1998. According to analysts, the figures close the door for the Bank of Mexico to resume interest rate cuts. Meanwhile, the underlying index continued to moderate and grew at its slowest pace of the year, at 4.46% annually. Within it, goods prices rose 4.43%, while services increased 4.49% and accelerated for two consecutive biweekly periods. In contrast, the non-underlying component surged 5.18% annually, the biggest increase since mid-last year, driven by a 23.9% jump in fruit and vegetable prices, the most significant since July 2024. Economists agree that the inflation data for the first half of March introduces a concerning element but should be interpreted with nuance. This suggests that, for now, there is no evidence of a de-anchoring in the inflationary dynamics, but rather of a transient shock that could generate volatility in the short term. The data is relevant from a monetary policy perspective, as it reinforces the need for caution. In particular, it complicates the outlook for additional interest rate cuts in the very short term. James Salazar, deputy director of economic analysis at Kapital Grupo Financiero, agreed that the inflation result shows there is no red flag indicating that inflation will skyrocket, as it is still concentrated in highly volatile elements that could ease at any time. He projected that the pressure will be very temporary. Given the current high-uncertainty environment, the Bank of Mexico should change its stance and discourse, keeping the interest rate unchanged, experts believe. They warn that without a change in its position, the Bank of Mexico could suffer a loss of credibility and generate distrust in the management of monetary policy and its commitment to bring inflation to 3%.
