Mexico headline inflation seen slowing in early July to 2021 levels

Mexico headline inflation seen slowing in early July to 2021 levels

MEXICO CITY (Reuters) – Mexico’s headline inflation likely eased in the first half of July to its lowest level in more than two years, but still remained above the central bank’s target, a Reuters poll showed Friday, reinforcing bets the bank will hold its key rate longer.

The median forecast of 10 analysts see annual headline inflation at 4.77% in the first 15 days of the month, its lowest level since March 2021.

Core inflation, which strips out volatile food and energy products, is forecast to have slid to 6.73% year-on-year, marking the eleventh consecutive fortnight of slowdown.

Both still remain well above the central bank’s target of 3%, plus or minus 1 percentage point.

Last month, Mexico’s central bank board members made the unanimous decision to hold its benchmark interest rate at 11.25% for the second time, and warned that it will be necessary to keep it at that level for a prolonged period of time for inflation to converge to its target.

Banxico first paused its rate hikes in May after a nearly two-year hiking cycle that began in June 2021.

In the first half of July, consumer prices were forecast to have risen 0.27% compared with the previous two-week period, while the core index likely rose 0.22%.

Mexico’s statistics institute will release inflation data for the first half of July on Monday.