Mexico inflation accelerates in October, testing Banxico rate path

Investing.com -- Mexico’s annual headline inflation accelerated faster than anticipated in the first half of October, complicating the central bank’s policy trajectory as officials evaluate whether to extend a months-long pause on interest rates.

Consumer prices rose 3.62% in the two weeks through mid-October compared with the same period a year earlier, according to data released Thursday by national statistics agency INEGI. The bi-weekly print surpassed median market expectations, lifting the annual headline rate from late September and snapping a brief trend of disinflationary momentum.

Underlying price pressures also intensified over the period, driven largely by gains across the services sector. Core inflation, which strips out volatile food and energy costs to better reflect long-term trends, accelerated to 3.78% year-over-year, coming in above forecast consensus and exceeding the previous period's reading.

The stubbornness of price gains places Bank of Mexico policymakers in a delicate position ahead of their upcoming monetary policy decision on November 5. Having maintained the benchmark borrowing rate at 6.5% since June, the governing board recently abandoned explicit forward guidance in favor of a strictly data-dependent stance.

While central bankers contend that long-term inflation should converge toward their 3.0% target by late 2027, recent board minutes highlighted growing concern over external risk factors. Officials pointed to lingering international trade friction and heightened geopolitical volatility in the Middle East as primary upside risks that could prolong domestic price elevated levels.

Original Article

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