On May 5, 2025, a Reuters poll of 16 economists projected Mexico’s headline annual consumer price index (CPI) inflation to tick up to 3.90 % in April, compared with 3.80 % in March. Core inflation—which strips out volatile food and energy components—was seen rising more sharply, from 3.64 % to 3.92 %, according to the median forecast. Monthly figures pointed to a 0.30 % increase in overall prices and a 0.47 % rise in core CPI during April. Despite the uptick, both headline and core measures remain comfortably within the Bank of Mexico’s (Banxico) official target range of 3 % ± 1 %, supporting market expectations for further interest‐rate cuts.
Strong Underpinnings for Monetary Easing
Banxico, which cut its benchmark interest rate by fifty basis points to 9.00 % on April 24, faces a delicate balancing act: curbing inflation without stifling an economy that barely avoided a technical recession in Q1. Mexico posted a 0.2 % quarter‐on‐quarter GDP expansion from January through March, reversing a 0.6 % contraction in Q4 2024. While growth remains tepid—private-sector forecasts have slashed full-year GDP to around 0.2 %—the restrained inflation readings give policymakers room to lower borrowing costs further at their next meeting on May 15.
Drivers of April’s Price Dynamics
Analysts attribute the modest rise in headline inflation to spillovers from higher global energy prices and a rebound in housing rents, following earlier declines in both categories. Food prices, which had driven much of the headline momentum in late 2024, showed stabilization, with vegetable and meat prices rising at slower rates than seen earlier in the year. Core inflation’s uptick was led by services—including transportation and lodging—and a gradual pickup in apparel costs, as global supply‐chain bottlenecks eased and domestic demand ticked up amid holiday spending in late April.
Market‐based measures of inflation expectations have remained anchored near Banxico’s midpoint target, even as consumers report slightly higher year‐ahead price projections in private surveys. A recent Banco de México survey showed mean household inflation expectations at 4.1 % over the next 12 months—just above the central bank’s zone—compared with 3.9 % three months prior. The modest rise in expectations underscores the importance of maintaining clear communication from Banxico to prevent unmooring of wages‐and‐prices dynamics.
With inflation contained and growth anemic, Banxico’s Governing Board faces the prospect of additional rate cuts—potentially in 25- to 50‐basis‐point increments—between now and year‐end. Most economists in the Reuters poll placed the terminal policy rate between 7.50 % and 8.00 % by December 2025. However, the timing and pace will hinge on incoming data: a sharper-than‐expected rise in services inflation or a rebound in global commodity prices could temper easing, while renewed weakness in domestic demand might accelerate it.
Mexico’s inflation trajectory contrasts with several Latin American economies, where rates have fallen more slowly. Brazil’s inflation remained around 4.5 % in April—above its central bank’s 3 %±1 % target—and Colombia’s CPI hovered near 6 %. In contrast, Peru and Chile have already reported year‐on‐year inflation under 3.5 %, giving their central banks greater policy flexibility. Mexico’s position in the middle of the regional pack reflects its more diversified economy and relatively stable exchange rate, despite intermittent volatility tied to U.S. monetary policy shifts.
Several headwinds could challenge Mexico’s disinflation path. A weaker peso—driven by U.S. Federal Reserve tightening or geopolitical tensions—would lift import prices, particularly for energy and industrial raw materials. Additionally, government fiscal measures, such as utility‐subsidy reforms or higher public‐sector wages ahead of elections, could inject upward pressure on prices. Finally, the outcome of ongoing U.S.–Mexico–Canada Agreement (USMCA) renegotiations on agricultural imports may influence domestic food-price dynamics later this year.
INEGI, Mexico’s national statistics institute, is scheduled to publish the official April CPI figures on May 8, providing granular breakdowns across food, housing, transport, and health categories. Analysts will scrutinize monthly seasonals, trimmed-mean measures, and subindex contributions to gauge underlying pressures. The official data will be critical for Banxico’s policy statement on May 15, when it outlines its rationale for any further rate adjustments.
April’s moderate inflation increase to 3.90 % underscores Mexico’s regained stability after pandemic‐era volatility, allowing Banxico to continue easing monetary policy in support of an undynamic economy. Nonetheless, external shocks, fiscal developments, and shifts in inflation expectations represent ongoing risks. As stakeholders await INEGI’s detailed release, the central bank’s May decision will offer vital clues on how far and how fast borrowing costs may fall in 2025.