Mexico’s annual inflation reached 3.45% in September, with tomatoes and onions together adding nearly half of the month’s price increase, figures from the National Institute of Statistics and Geography (INEGI) showed Thursday, 8 October. Consumer prices climbed 0.42% from August. Core inflation eased, but the weaker peso and higher food and household fuel prices remain pressures on Mexican buyers.
Food prices and the peso
Fruit and vegetable prices rose 4.40% in September and 8.78% from a year earlier. Tomatoes jumped 30.25% during the month, onions rose 23.00%, and household LP gas increased 3.14%. Expansión reported that tomatoes and onions together contributed 0.20 percentage points to monthly inflation. INEGI didn't explain the price spikes, and it's unclear whether they will reverse in October.
The non-core index, which includes more volatile items, rose 1.20%. Some prices fell. Potatoes dropped 13.92%, avocados fell 8.11%, and internet, phone and pay-TV bundles declined 2.06%.
The peso’s movement adds another risk for buyers. Banxico’s FIX reference rate rose from 16.98 pesos per U.S. dollar on Tuesday, 1 September, to 18.11 on Thursday, 8 October. At that rate, US$100 converted to about 1,811 pesos. Banxico listed peso depreciation as an upside risk to inflation because a weaker peso makes imported goods, including those from the United States, more expensive for Mexican buyers. How much of the recent depreciation may pass through to consumer prices remains unknown.
Banxico’s choices
Core inflation eased to 3.75% from 3.88% in August, and core prices rose 0.20% during September. Goods inflation within the core index slowed to 3.21%, while services inflation slowed to 4.27%. Restaurant and education costs continued rising faster than the headline rate. The annual headline figure stood at 3.26% in August and 3.76% a year earlier; September’s result came in just below the 3.47% forecast. Core inflation also fell short of its 3.79% forecast.
Banco de México (Banxico), the autonomous central bank, targets inflation of 3%, with a tolerance range of one percentage point on either side. On Thursday, 24 September, it said it expected headline inflation to reach that target in the fourth quarter of 2027.
Banxico’s board kept its overnight rate at 6.50% on 24 September. Minutes published Thursday showed that three of the five board members were open to a rate cut, with one describing it as a possible one-off. The other two urged caution; one warned Banxico might otherwise have to discuss matching Federal Reserve increases. The minutes didn't name the members open to a cut, and none committed to a date. Citi-surveyed analysts cited by Expansión expected the rate to stay at 6.50% through December.
Household costs and external pressure
The Federal Reserve raised its target range by a quarter point in September, to 3.75% to 4.00%. Banxico said Mexican monetary policy “would not have to react mechanically” to Federal Reserve moves because economic conditions differ between the two countries. The Federal Reserve was scheduled to meet on 27 and 28 October; Banxico’s next rate decision was due Thursday, 5 November, at 1 p.m. Mexico City time.
A basket of 170 goods and services tracking minimum living costs for lower-income households rose 3.29% from a year earlier. Remittances reached US$5.45 billion in August, 3.6% less than a year earlier, according to Banxico data. Producer prices rose 4.05% year over year, a cost signal for U.S. companies buying goods made in Mexico. INEGI was scheduled to publish October inflation on Monday, 9 November.