Economics: Rising consumer inflation driven by PPI, combined with discordant monetary policy, make for a complex scenario
Annual inflation in Mexico reached 4.42% in May 2025, with core inflation propelled to 4.06% by rising merchandise and services prices. At the same time, the non-core component increased 5.34% annually, driven especially by meat products (8.25%). Yet despite rising inflation, Banxico has lowered the benchmark rate and is sending signals that it will continue to do so at this year's meetings. This represents a risky stance in the face of global and domestic economic uncertainty.
Monetary easing could reduce the attraction of foreign capital and pressure the exchange rate. In the inflationary context, there are greater risks that the Federal Government may attempt to resort to price controls on specific products in the coming months. Such moves have historically caused shortages, costly subsidies and lower quality products, discouraging private investment.
In other indicators released last week, it was reported that in April industrial production registered an annual contraction of -0.7% (vs -1.3% in the previous month) and an increase of 0.1% with respect to March 2025 according to seasonally adjusted figures.
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