In a significant development for Mexico’s economy, the National Consumer Price Index (INPC) experienced its largest monthly increase this year in July, rising by 1.05% compared to June. This surge has pushed the annual inflation rate to 5.57%, marking the highest level since May 2023, when it reached 5.84%. The increase has been driven primarily by rising prices of essential food items, notably tomatoes, onions, and oranges, according to a report released by the National Institute of Statistics and Geography (Inegi) on Thursday.
While the current inflation figures are still below the levels seen in 2022—when inflation exceeded 8%—the trend this year is causing concern. In February, the INPC fell by 0.48% to reach 4.4%, but since then, it has been on a continuous upward trajectory. Core inflation, which excludes highly volatile products to provide a more stable measure, increased by 0.32% on a monthly basis and stands at 4.05% annually.
The most significant rise within core inflation has been observed in the services sector, which saw a 0.55% increase from June to July. With the start of the school year approaching, education costs have also risen by 0.15%. Housing prices have similarly climbed by 0.36% despite the Bank of Mexico’s (Banxico) efforts to temper the market by maintaining a high-interest rate of 11%.
In contrast, non-core inflation—which includes products and services influenced by factors such as weather and government policies—has seen an annual increase of 10.36%. Notably, fruits and vegetables have surged by 23.55% so far in 2024, with energy prices increasing by 7.31%.
One of the most concerning figures is the price index for the basic consumption basket, a crucial measure for millions of Mexicans relying on essential goods. This index has risen by 1.22% since June, reaching an annual rate of 5.60%. This is a stark contrast to the same period last year, when the increase was only 0.24%. In markets and supermarkets, consumers have felt the pinch, with tomatoes increasing by 33.34%, onions by 25.08%, and oranges by 18.57%. On the other hand, some relief has been observed with grapes and serrano peppers, which have decreased in price by 18.97% and 18.35%, respectively.
The Governing Board of Banxico is expected to convene on Thursday afternoon to discuss monetary policy, announce the interest rate, and project inflation trends for the next three quarters. The last meeting, held on June 27, anticipated that the INPC would be between 4.6% and 4.5% from July to September—a forecast now surpassed by the current 5.57% annual rate. This figure remains significantly above Banxico’s target of 3% for the end of 2025.
As inflationary pressures mount, Mexican households and policymakers face increasing challenges. The economic outlook will heavily depend on Banxico’s monetary policy decisions and external factors influencing the non-core segment of inflation. With the cost of living rising, particularly in essential goods, the focus will remain on finding effective strategies to stabilize prices and support economic growth.
