Mexico's statistics agency reported Thursday that prices advanced 3.62% from a year earlier in the first half of October, coming in a touch hotter than forecasts and picking up from late September's 3.49%. Core inflation, which leaves out more volatile food and fuel categories, also nudged higher to 3.78%, above expectations and the prior 3.71%.
The biggest pushes came from a few standouts. During the first half of October, electricity jumped 18.51%, air transport climbed 14.77%, and green tomatoes surged 22.07%.
Last month the central bank kept borrowing costs unchanged at 6.5% for a third straight decision, maintaining a level held since June while it evaluates whether earlier disinflation will persist. Officials also set aside prior hints of a prolonged pause and said decisions will hinge on incoming data.
Meeting minutes pointed to trade uncertainty and a worsening conflict in the Middle East as key forces behind price pressures. Even with risks tilted higher, the bank still projects inflation will return to its 3% objective, within a one-point tolerance range, in the final quarter of 2027.
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Benito Berber, Natixis's chief Americas economist, said the standout shift is that non-core inflation is now clearly rising. "Just a couple of months ago, non-core was helping to keep a lid on inflation, as it was around 1% year-over-year. Now it is solidly above 3.0%." He added that core looks to have bottomed on an annual basis in September and is starting to firm. In his view, combined with a depreciating peso, the room for a rate cut at the next meeting "has materially diminished." Berber also said, "We believe that the comments in the minutes about a possible rate cut were more a way of signaling that they don't want to follow the US Fed mechanically as it tightens."
Pantheon Macroeconomics' Andrés Abadía expects Banxico to leave its policy rate at 6.50% through year end, citing sticky core pressures, and wrote that "Headline inflation will remain vulnerable to temporary swings in energy and agricultural prices."
In plain English: a hotter early-October print and a firmer core make a near term cut less likely, while the bank still aims for target by late 2027. For peso assets and local bonds, that points to a central bank that is patient, watching the data, and not eager to chase the Fed. Keep an eye on Nov. 5, and on those non-core swings that can whipsaw the headline.
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