General inflation in Mexico would have rebounded in the first half of January at an annual rate, pressured mainly by the entry into force of an increase in taxes and tariffs, a Reuters poll showed, fueling expectations that the central bank could pause the cycle of cuts to its key rate.
According to the median of the projections of 18 participants, the general consumer price index would have advanced to 3.86% at an annual rate, after two continuous fortnights of decline.
For core inflation, which eliminates high volatility products, estimates indicate that it would also have accelerated to 4.48%, after having moderated in the previous two fortnights.
At the beginning of the year, the government launched an increase in taxes on products such as sugary drinks and cigarettes and raised tariffs for imports from China and other mostly Asian countries, with which Mexico does not have trade agreements.
Analysts also anticipated certain pressures derived from the entry into force of an increase in the minimum wage.
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The rebound in prices reinforced prospects that Banco de México could pause its series of interest rate cuts starting with its next decision on February 5, after a long cycle of monetary easing that began in early 2024, after the key rate reached an all-time high of 11.25%.
Since then, it has decreased by 425 basis points (bp) to its current level of 7%.
Deputy Governor Jonathan Heath said in an interview last week that he believes the authority’s governing board could vote to leave the cost of loans unchanged at its February meeting, which coincides with widespread market expectations.
“We maintain our forecast of at least 50 bp in rate cuts this year, although Banxico’s recent communication suggests that the Board could be creating room for a pause in February if necessary. The trajectory will depend largely on January inflation data,” BBVA said.
With information from Reuters
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