Mexico's consumer price inflation decelerated again in May, official figures showed on Tuesday, moving the annual rate back into the upper end of the central bank's designated target band. The headline year-on-year inflation rate was 3.94% in the 12 months through May, down from 4.45% in April and below the 4.2% consensus predicted in a Reuters poll of economists.
On a monthly, non-seasonally adjusted basis, consumer prices fell 0.21% in May compared with April, a larger drop than economists had expected, who had forecast a 0.12% decline. The more closely watched core inflation gauge, which excludes some of the most volatile food and energy components, rose 0.22% in May. On an annual basis the core index slowed modestly to 4.19% from April's 4.26%.
Mexico's central bank, Banxico, maintains an inflation target of 3% with a tolerance band of plus or minus one percentage point. The institution has signaled an expectation that inflation will reach its 3% goal in the second quarter of 2027.
Context and implications
The latest readings indicate a continuation of a downtrend in headline inflation for a second month, while monthly data show a contraction in consumer prices for May. Core inflation remains above 4% on an annual basis but has edged lower from April.
These data points are directly relevant to Banxico's assessment of price pressures and its medium-term outlook, given the central bank's explicitly stated target range and the timeline it has provided for hitting a 3% rate.
Data recap
- Headline annual inflation: 3.94% in the year through May, down from 4.45% in April.
- Monthly change (non-seasonally adjusted): -0.21% in May, versus an expected -0.12%.
- Core monthly change: +0.22% in May; core annual: 4.19%, down from 4.26% in April.
- Banxico target: 3% +/- 1 percentage point; expected to reach 3% in Q2 2027 according to the central bank.