Tomato prices jumped 30.25% in Mexico last month, while onions climbed 23.00%. Together, the two staples added 0.20 percentage points to September's price increase—nearly half the monthly total, Expansión reported. The shock hit kitchen tables hardest where households had the least room to absorb it.
Mexico's annual inflation reached 3.45% in September, up from 3.26% in August, the National Institute of Statistics and Geography (INEGI) reported on Thursday, 8 October. Core inflation, which excludes volatile items, eased from 3.88% to 3.75%. Both figures came in just below forecasts: 3.47% for headline inflation and 3.79% for core. Consumer prices rose 0.42% from August.
Who Feels It
Volatile items drove the increase. The non-core index climbed 1.20% in September, as fruit and vegetable prices rose 4.40% during the month and 8.78% from a year earlier. Household LP gas prices increased 3.14%. A basket of 170 goods and services that measures minimum living costs for lower-income households rose 3.29% year over year. Headline averages can hide who pays for what.
Some prices fell. Potatoes dropped 13.92%, avocados 8.11%, and internet, phone and pay-TV bundles 2.06%. INEGI offered no explanation for the jump in tomato and onion prices, so it's unclear whether those increases will reverse in October.
September marked the second straight monthly rise in headline inflation, after a reading of 3.12% in July. Annual inflation stood at 3.76% a year earlier. Core inflation has declined each month since May, when it reached 4.19%; core prices rose 0.20% in September. Within the core index, goods inflation slowed to 3.21%, while services inflation eased to 4.27%. Restaurant and education costs, however, continued to rise faster than the headline rate.
The Central Bank's Balancing Act
Banco de México (Banxico), Mexico's autonomous central bank, aims for 3% inflation, allowing a one-percentage-point margin either way. On 24 September, it said headline inflation should reach that target in the fourth quarter of 2027.
The board unanimously held its overnight rate at 6.50% that day, marking its third consecutive hold. Its last cut came in May, and the rate stood at 10.00% at the start of 2025. The U.S. Federal Reserve, by contrast, lifted its target range by a quarter point in September, to 3.75% to 4.00%. It was the Fed's first increase since July 2023.
Banxico said Mexican monetary policy “would not have to react mechanically” to Fed decisions because conditions differ between the two countries. Minutes published Thursday showed that three of the five board members were open to a rate cut; one called it a possible one-off. The other two urged caution, and one warned that Banxico might otherwise have to discuss matching Fed hikes. Analysts surveyed by Citi, whom Expansión cited, expected the rate to remain at 6.50% through December. The minutes didn't identify the members open to a cut, and none gave a date.
The Peso and the Remittance Squeeze
Banxico's FIX reference rate moved from 16.98 pesos per U.S. dollar on Tuesday, 1 September, to 18.11 on Thursday, 8 October. A dollar bought 6.7% more pesos than on 1 September, but 1.3% fewer than a year earlier. Banxico identified peso depreciation as an upside inflation risk: a weaker peso makes imported goods, including goods from the United States, more expensive for Mexican buyers.
At the FIX rate, US$100 converted to about 1,811 pesos. Remittances—the money migrants send home—reached US$5.45 billion in August, 3.6% below the figure a year earlier, Banxico data showed. How much of the peso's recent slide will feed through to prices remains unknown. Producer prices, which the agency published separately that same day, rose 4.05% year over year.
The Federal Reserve meets on 27 and 28 October. Banxico will announce its next rate decision on Thursday, 5 November, at 1 p.m. Mexico City time; INEGI will publish October inflation on Monday, 9 November.
Why This Matters:
A 3.45% headline figure looks tame. The detail is less comfortable. Fruit and vegetable prices stand 8.78% above a year ago, and those goods take the biggest share of a low-income household's budget. The peso has lost ground since 1 September, which could lift import costs, while remittances—a lifeline for many families—are shrinking. Banxico's board is divided over whether to cut rates, and Fed hikes complicate the decision. How the bank weighs inflation against growth will shape borrowing costs, wages and food costs for millions of people. The figures show a gap between averages and what households actually pay.