Mexico inflation speeds up in January after new taxes go into effect

MEXICO CITY, Feb 9 - Inflation ⁠in Mexico sped up ⁠in ‍January, data from the national statistics agency showed on Monday, supporting the central bank's decision last week to hold its interest rate as it sees inflation ‍taking longer to reach the bank's target.

Consumer prices rose 3.79% in the year ​through January, above December's rate of 3.69% and slightly under the 3.82% forecast by analysts polled by Reuters.

The closely ​watched core index, which strips out highly volatile prices, rose to 4.52% up from 4.33% in December and the highest level since March 2024.

In the month of January alone, consumer prices rose 0.38%, according to ​non-seasonally adjusted figures, driven by the increase in core prices, which rose 0.60% during the month.

The new year brought new taxes rolled out by the government alongside a boosted ​minimum wage and new tariffs on China and other mainly Asian countries that Mexico does not have a free trade agreement ‌with.

Cigarettes and bottled soft drinks, targets of the tax hikes that took effect at the year's start, saw the largest price increases.

Last Friday, the ​Bank of Mexico held its benchmark interest rate at ⁠7.0% after 12 consecutive interest rate cuts. It also forecast inflation hitting the bank's 3% target in the second quarter of 2027, a notable ‌extension from its previous forecast of the third quarter this year.

President Claudia Sheinbaum's administration rolled out new taxes on products deemed unhealthy, including soda, cigarettes and video games, as part of its effort to narrow ‌Mexico's fiscal deficit while keeping a pledge to expand social programs and support the finances of heavily indebted ‌state oil company Pemex. Sheinbaum has said a deep fiscal reform is avoidable.

Members of the central bank's governing board have said they expect the government's new taxes and tariffs to push up prices, although likely ‍temporarily, and that time is needed to assess their impact on inflation.

"We believe the effects of the tariffs that took effect at the beginning ⁠of the year will gradually impact merchandise inflation throughout 2026. However, these upward pressures will be partially offset by currency appreciation, low producer price inflation (1.5% year-on-year in January), and modest economic growth," Banamex said in a note after the inflation report.

(Reporting by Ricardo Figueroa Salas and Noe Torres; Writing by Brendan O'Boyle; Editing by Andrea Ricci )

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