Mexico inflation back within Banxico’s variability range

Headline inflation (1H-Nov): 0.04% 2w/2w; Banorte: 0.22%; consensus: 0.23% (range of estimates: 0.12% to 0.71%); previous: 0.16% 

Core inflation (1H-Nov): -0.11% 2w/2w; Banorte: -0.03%; consensus: 0.09% (range of estimates: -0.03% to 0.19%); previous: 0.07% 

The final reversal of summer discounts in electricity tariffs was observed this period, up 22.7% 2w/2w, adding 39bps to the headline. Other components within the non-core were more positive, with fresh fruits and vegetables down 3.3% and low-grade gasoline falling 3.2%. The core was also below market consensus, with goods (-0.3%) benefited by the extended discounts period of El Buen Fin.

Annual inflation fell to 3.43% from 4.09% in October, below the upper bound of Banxico’s variability range for the first time since August. This was helped by a more benign base effect at the non-core, which fell to 2.67% from 4.42%. Core inflation also declined, to 3.68% from 3.98%. 

Along with this report, we will focus on Banxico’s Quarterly Report tomorrow and the latest minutes on Thursday, which in our view could provide further valuable information about the policy path ahead.

We expect a further breather in Mbonos and additional compression in inflation breakevens.