(Bloomberg) -- Mexico’s inflation slowed more than expected in the first half of March, as the central bank is set to meet this week to consider a sixth straight rate cut and likely a second straight half-point reduction.
Consumer prices rose 3.67% from a year prior, below the 3.7% median estimate of analysts surveyed by Bloomberg and less than the 3.81% in the previous two-week period. Core inflation, which leaves out volatile items including food and fuel, also decelerated to 3.56% from 3.66% in late February.
Mexico’s central bank, known as Banxico, is expected to cut borrowing costs by 50 basis points to 9% on Thursday. Governor Victoria Rodriguez had suggested the bank would be open to additional cuts of a similar magnitude to the half-point reduction it delivered last month. The decision is expected to take some pressure off the slowing Mexican economy.
“This print is supportive for a 50bp rate cut by Banxico as it will imply that inflation will perform in line with its forecasts in a context in which growth is not performing well,” said Marco Oviedo, a strategist at XP Investimentos. Banxico’s message during its next rate decision should be dovish and open the door for an additional half-point cut in May, he added.
Since Banxico’s February meeting, Mexico staved off a threat of across-the-board US tariffs that President Donald Trump had first announced would be 25%. Though new fees did go through on steel, aluminum and goods not covered by the US-Mexico-Canada free trade agreement, most of Mexico’s $513 billion of exports to the US were spared.
President Claudia Sheinbaum earlier this month expressed confidence that Mexico won’t be hit by tariffs on April 2, when Trump said he would retaliate against any country with levies on US goods. Unlike Canada and China, Mexico did not respond to the US’ briefly imposed 25% tariff with fees of its own in early March.
In the most recent survey from Citi’s research unit, analysts forecast that the next Banco de Mexico move would be a 50 basis-point cut. The central bank targets inflation at 3%, plus or minus one percentage point, and the analysts forecast inflation would be within that range, at 3.8%, by the end of 2025, and at 3.78% at the end of 2026.
One concern might be that prices for food and beverages rose 0.37%, compared with the 0.30% reading in the previous two-week period. However, energy fell 0.71% from a 0.05% increase in late February.
The economy is slowing, with the central bank projecting 0.6% growth through the year, down from a previous forecast of 1.2%. Mexico’s Finance Minister Rogelio Ramirez de la O resigned in early March as had been expected and was replaced by Deputy Finance Minister Edgar Amador.
--With assistance from Rafael Gayol.
