Banxico will not reach its 3% inflation target set for the summer of 2026, which will reduce the credibility that it built with great effort and was able to maintain for a couple of decades, according to the Mexican Institute of Finance Executives (IMEF).
The private sector organization indicated that one of the biggest challenges is achieving the convergence of inflation to the central bank’s goal. Banxico anticipates that this convergence will occur in the third quarter.
The IMEF noted in a statement that although inflation in 2025 managed to fall within Banxico’s tolerance range by closing at 3.69%, underlying inflation persists above 4%.
The monetary entity has a tolerance margin for its inflation goal of one percentage point up and down.
The IMEF described it as worrying to observe that in its December monthly survey among finance executives for 2026, the expectation is that inflation will close the year at 3.95% and for 2027 at 3.80%.
Those consulted anticipate higher inflation for this year due to the presence of several shocks that have impacted prices since this month, according to the organization.
Among the main ones are the inertia of the adjustment that some relative prices suffered at the end of 2024 and that is carried over time; other prices “withstood” the adjustments that needed to be made so as not to affect year-end sales, and the adjustment to the minimum wage of 13% for 2026 increases labor costs to produce, especially for SMEs and causes them to transfer a percentage to the prices of their products, in addition to the negative impact on employment.
In addition, logistics costs for transporting goods continue to increase due to insecurity, lack of competition in various sectors and industrial concentration.
The IMEF added that another factor, although with a temporary impact, is the tax increases such as the IEPS and in general the uncertainty of being able to maintain fiscal and debt discipline, as well as the tariff policy.
“All these factors mean that a balance of risks for rising inflation is perceived and that the second-order effects of price growth could increase underlying inflation even more,” he said.
He asserted that postponing the achievement of the inflation goal will cause a delay in additional reductions in the reference interest rate, so both the government and the private sector would have to pay higher interests for the contracted loans.
After two straight fortnights with decelerations, general inflation would have rebounded in the first of January to 3.86% at an annual rate, pressured mainly by the entry into force of an increase in taxes and tariffs, according to a Reuters survey published this Tuesday, fueling expectations that Banxico could pause the cycle of cuts to its reference rate.
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On Thursday, Inegi will release inflation data for the first half of January.
Analysts consulted by Citi México maintain their forecasts that both general and underlying inflation will close the year at 4%, according to the group’s most recent survey published today.
Last week, the director for Latin America of Moody’s Analytics, Alfredo Coutiño, stated that the premature relaxation of monetary policy in Mexico without having achieved convergence towards the 3% inflation goal had caused Banxico’s loss of credibility.
“Neither the market nor analysts believe in the effectiveness of current monetary policy to achieve the inflation objective,” he said in a report.
Lee: Premature rate cuts eroded Banxico’s credibility: Moody’s
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