With this push, the annual general inflation rate climbed to its highest level since October 2024. The index for the non-underlying component, which includes the most volatile-priced products and government-authorized tariffs, increased by 2.5% monthly in March; but at an annual rate, it rebounded to 5.1% from 2.4% in February. Within the non-underlying component, prices for agricultural products rose 4.5% in March and advanced to an annual rate of 8.8%, where the sub-index for fruits and vegetables jumped 10.8% in the month, unprecedented for a March, while its annual inflation shot up to 21.8% from 9.9% in February. Meanwhile, prices for energy and government-authorized tariffs increased by 0.9% monthly, while their annual rate was 2.2%, the highest since November 2025. Underlying inflation, which excludes goods and services with the most volatile prices and is a better gauge of the inflationary trend, recorded an increase of 0.4% monthly and 4.5% annually in March, marginally easing from its previous level. However, it has stayed above 4% annually for 11 months and, therefore, above the Bank of Mexico's (Banxico) target range, despite the country's weak economic activity. Within the underlying component, inflation for goods seems to be gradually subsiding, but that for services continues to show reluctance to fall. Prices for goods increased in March by 0.3% monthly and grew 4.4% annually, decelerating from 4.6% in February. In contrast, prices for services rose in March by 0.5% and 4.5% against the same month of 2025, marginally accelerating, enough to position at its highest since the previous June. On Thursday, after the inflation data was released, Banxico published the minutes of the monetary policy decision announced on March 26, in which it was decided, by a majority of 3 votes to 2, to reduce the benchmark rate by a quarter point to place it at 6.75%. With a similar message to the one published in the communiqué on the monetary policy decision, the minutes reinforce the idea that a majority of the members of the Governing Board considers that there is room to make an additional rate cut, even as inflation risks have increased. The disagreement is on when to close the rate-cutting cycle, if in the decision at the beginning of May or at the end of June. The minutes present the opinions on the dissenting votes from Deputy Governors Galia Borja and Jonathan Heath, who voted to keep the rate at the 7% level. In Borja's opinion, 'there is still limited information to accurately assess the implications of the shock coming from the conflict in the Middle East, as well as its magnitude and duration'. Additionally, 'since November, the ex-ante real interest rate has been within the estimated neutral range and is very close to its central estimate,' she stated. Heath pointed out that 'the balance of risks for inflation has become much more biased to the upside' amid high uncertainty derived from the new armed conflict and an unanticipated shock in agricultural prices, which should dissipate in a few months. 'Facing greater risks, we lose nothing in pausing and waiting for these shocks to truly dissipate. It was coming. General inflation in Mexico rebounded last month, influenced once again by the increase in prices of agricultural products, especially fruits and vegetables. In March, the National Consumer Price Index reported an advance of 0.9% monthly, with rounding of figures. Although it was slightly below the expectations of analysts surveyed by Bloomberg, it was the highest figure for that month since 2022. The general inflation rate in the third month of 2026 was 4.6% annually, with an acceleration observed from 4.0% in February, according to information from INEGI published on Thursday. In contrast, we lose a lot by reducing the target rate when underlying inflation persists and non-underlying inflation increases. This gives the mistaken impression of a lesser attachment to the priority mandate,' he warned. Precisely what Banxico is putting into question is its credibility regarding its commitment to the constitutional mandate of maintaining price stability.
