Inflation in Mexico rebounds to 4.22% in May, exceeding Banxico's target

Inflation in Mexico once again raised alarm bells, reaching 4.22% annually in the first half of May 2025, exceeding analysts' expectations and the Bank of Mexico's target range. This increase, driven by basic goods and some services, occurs in a context of economic slowdown.

The National Institute of Statistics and Geography (INEGI) reported on May 22 that the National Consumer Price Index (INPC) registered an annual increase of 4.22% in the first fifteen days of May 2025. This figure not only exceeded the median of analysts' estimates, which stood at 4.02% , but also, for the first time since December 2024, it was above the target range of the Bank of Mexico (Banxico), usually set at 3% +/- one percentage point.

Core inflation, which excludes the most volatile items such as food and energy, also showed a slight acceleration, rising to 3.97% annually from 3.96% in the previous two weeks.

The impact on Mexican families' pockets is due to the rising prices of several essential and frequently consumed products and services. Among those that saw the greatest price increases are:

* Papaya: +16.25%

* Movie tickets: +14.82%

* Chicken: +8.96%

* Bananas: +4.94%

* Tomato: +4.37%

* Potato and other tubers: +4.17%

* Detergents: +1.08%

* Beef: +0.99%

* Food at restaurants, cafeterias, and taquerias: +0.26%

* Own home: +0.16%

It's important to note that, although the INEGI (National Institute of Statistics and Geography) reported a 1.22% overall drop in fruits and vegetables, livestock products (meat, milk, and eggs) increased by 10.25%, becoming one of the main drivers of this inflation. Chicken and tomatoes, due to their importance in daily consumption, have a considerable impact on households' perceptions of inflation.

This inflationary surge comes at a delicate time for the Mexican economy. Gross Domestic Product (GDP) grew by just 0.2% in the first quarter of 2025, narrowly avoiding a technical recession. Furthermore, the Ministry of Finance and Public Credit (SHCP) has admitted that the Mexican economy will grow below previous estimates in 2025. Some analysts' forecasts for this year's growth are as low as 0.1%.

Given this situation, the Bank of Mexico finds itself at a crossroads. Recently, the Governing Board decided to cut the benchmark interest rate by 50 basis points, placing it at 8.5%. Banxico Governor Victoria Rodríguez Ceja had indicated that the slowdown in economic growth was contributing to less pressure on prices. However, the current inflation figure could complicate future monetary policy decisions, as the central bank must weigh the fight against inflation with the need to avoid further slowing an already weakened economy. Analysts predict that Banxico could implement a fourth consecutive half-point rate cut in June.

"Inflation of 4.22% in May 2025 marks a further setback in economic stabilization efforts."

For Mexican families, this inflationary scenario demands a careful review and adjustment of budgets, the search for more economical alternatives, and the use of discounts. Persistently above-target inflation, combined with languid economic growth, poses risks of stagflation, a particularly difficult environment for the recovery of purchasing power.

Below is a table showing some of the main drivers of inflation in the first half of May 2025:

| Product/Service | Bi-Weekly Increase (%) | Impact on the Family Economy |

| Papaya | +16.25 | Significant increase in price for a popular fruit. |

| Movie tickets | +14.82 | Higher cost for leisure and entertainment activities. |

| Chicken | +8.96 | Strong impact on the basic food basket as it is a key protein. |

| Tomato | +4.37 | Increase in a fundamental ingredient of Mexican cuisine. |

| Livestock Products (general) | +10.25 (annual) | Generalized pressure on meat, dairy, and egg costs. |

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