Mexico inflation today rose to 4.22% in early May, exceeding the Bank of Mexico’s 3%±1% target and driven by rising food and core prices, prompting a policy rethink.
Mexico’s annual inflation rate accelerated to 4.22 percent in the first half of May, moving decisively above the Bank of Mexico’s target band of 3 percent plus or minus one percentage point for the first time this year. The unexpected jump has rattled markets and underscored lingering price pressures despite three straight rate cuts, forcing policymakers to reconsider the current easing cycle.
According to data published by the National Institute of Statistics and Geography (INEGI), consumer prices rose 0.09 percent between late April and mid-May, contributing to the sharp year-on-year increase. The surprise uptick was led by a steep climb in poultry prices, which jumped by nearly 9 percent, while staples such as papaya surged 16 percent and tomatoes by over 4 percent. These gains far outpaced analysts’ forecasts of a 4.01 percent annual rate and reflect ongoing volatility in key food categories.
Core inflation, which strips out volatile food and energy components, also picked up steam—rising 0.16 percent over the half-month and hitting an annual rate of 3.97 percent, its strongest since August 2024. The acceleration in underlying prices was broad-based, with merchandise inflation at 3.51 percent and services inflation at 4.49 percent on an annual basis. Economists warn that a persistently high core rate could anchor expectations and complicate the Bank of Mexico’s path toward its 3 percent goal.
Non-core inflation, encompassing agricultural and energy items, climbed to 4.78 percent year-on-year, driven by a 5.79 percent increase in agricultural prices and a 3.71 percent rise in energy costs. While fruits and vegetables saw some relief—falling 1.22 percent annually—the broader basket of non-core goods remained elevated, reflecting external factors such as higher global oil prices and domestic supply constraints.
The Bank of Mexico slashed its benchmark interest rate by 50 basis points in March, April and May—bringing it to 8.50 percent, the lowest level since August 2022—in response to weakening economic activity. Yet the recent inflation resurgence has called into question whether further cuts are still warranted, as the central bank balances its dual mandate of price stability and support for growth.
Analysts remain divided on the next move. Capital Economics’ Kimberley Sperrfechter said the inflation spike is “unlikely to sway the central bank’s thinking,” maintaining that a further rate cut at the June meeting remains probable given the economy’s sluggish growth. In contrast, Banco BASE warned that it would be “prudent” for policymakers to pause easing until there is clear evidence that inflation is sustainably converging on target, especially in light of the core component’s upward trend.
Broader economic indicators help explain the dilemma. Preliminary INEGI figures show that Mexico’s gross domestic product grew 0.2 percent in the first quarter compared with the previous three months, narrowly avoiding a technical recession but underscoring a faltering recovery. That modest expansion, driven primarily by a rebound in agriculture and mining, contrasts starkly with the persistent price pressures documented in recent inflation data.
Looking ahead, all eyes will be on Banxico’s policy statement and updated inflation forecasts at the June 12 monetary policy meeting. Should price pressures prove more persistent than expected, the central bank may opt to hold rates steady or even contemplate a modest hike to re-anchor expectations. Conversely, a clear deceleration in core inflation could pave the way for another 50-basis-point cut, consistent with the easing bias that has prevailed for most of 2025.
For now, consumers and businesses face a renewed bout of uncertainty as higher prices test household budgets and corporate margins. With the next data releases on retail sales, public-sector wages and energy costs due in the coming weeks, Mexico’s monetary authorities will tread carefully as they seek to quell inflation without derailing a fragile economic recovery.
