Mexican consumer prices experienced their slowest rate of increase in 2024 since 2020, as the inflationary pressures resulting from the post-Covid environment began to subside. According to the National Statistics Institute, the consumer price index (CPI) rose by 4.66% in the 12 months leading up to December. This marked a decline from the previous year's rate of 7.82% and the 2021 rate of 7.36%.
The core CPI, which excludes energy and fresh produce prices, also decreased, reaching an increase of 5.09% in 2024 compared to the previous year's rate of 8.35%.
The surge in economic activity following the pandemic-induced recession in 2020 had caused inflation to soar to its highest level in over two decades, with a peak of 8.7% in the fall of 2022. This prompted the Bank of Mexico to raise its benchmark interest rate to a record high of 11.25%.
Since then, as inflation has eased, the central bank has maintained the interest rate at that level. However, it remains cautious about lowering rates, given that inflation still hovers above its target of 3%. Nevertheless, it is widely expected that the central bank will commence rate cuts during the first quarter of this year.
In December, the consumer price index saw a rise of 0.71%, leading to an increase in the 12-month inflation rate from November's figure of 4.32%. The surge in prices was primarily driven by higher fruit and vegetable prices and increased demand for tourism-related services during the Christmas and New Year holidays. Core CPI for December rose by 0.44%.
The Bank of Mexico predicts that inflation will slow to 3.5% in the fourth quarter of this year and return to its target in the second quarter of 2025. Market expectations, as per the central bank's recent survey of economists, point towards an inflation rate of 4% by the end of this year, with core CPI easing to 4.1%.
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