Mexico’s annual inflation rate rose slightly in August compared to July, ending a four-month streak of declines.
The national statistics agency INEGI reported Wednesday that the annual headline inflation rate was 3.26% in August, up from 3.12% in July.
Month-over-month inflation was 0.20% in August, while the annual core rate, which excludes volatile food and energy prices, was 3.88%, down from 3.95% in July.
Both the annual headline rate and the core rate came in just below the median estimates of analysts surveyed by Bloomberg.
The increase in Mexico’s annual headline rate came after inflation slowed on a month-over-month basis in each of April, May, June and July. The headline rate thus fell from 4.59% in March to 3.12% in July, a decline of 1.47 percentage points. During the same period, the Bank of Mexico (Banxico) cut its key interest rate by 25 basis points on two occasions, lowering it to 6.75% in March and 6.50% in May.
The central bank, which targets 3% inflation, appears unlikely to make any additional cuts to its key rate this year. Banxico is currently forecasting that inflation will be 3.5% at the end of 2026. It anticipates that the headline rate will gradually decline in 2027 to converge to its 3% target in the final quarter of next year.
Services inflation remains above 4%
Of the four broad categories monitored by INEGI, services recorded the largest year-over-year increase in prices in August. Annual services inflation was 4.33%, down slightly from a 4.36% reading in July. Education fees, one of the services sub-categories, rose 6.04% annually in August, the month in which students across Mexico returned to school.
Annual inflation for goods was 3.41% in August. Within that category, inflation was 4.68% for processed food, beverages and tobacco, and 2.32% for non-food goods.
Energy prices, including those for electricity and gasoline, rose 3.33% annually in August, while prices for agricultural products fell 1.53% year-over-year. The overall deflation for the agricultural products category was the product of a 5.22% decrease in meat prices and a 4.1% increase in fruit and vegetable prices.
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