Inflation 2Q Oct 2025

In the second half of October, inflation stood at 0.14% bw, reflecting lower pressures on agricultural products. As a result, headline inflation declined to 3.50% YoY, leaving room for Banco de México to deliver another rate cut at its December meeting.

Typically, inflation for this period averages 0.14% bw. Market consensus anticipated an increase of 0.12% bw, while our estimate stood at 0.09% bw.

The observed figure was above our forecast due to higher-than-expected pressures in the non-core component, which explains 4 basis points of our forecast error.

Non-core inflation came in at 0.19% bw, compared to our estimate of 0.00% bw and a historical average of 0.39% bw. Within this category, agricultural products rose 0.20% bw (vs. estimate -0.04% bw; historical 0.70% bw), while energy and government-authorized tariffs increased 0.18% bw (vs. estimate 0.03% bw; historical 0.14% bw). Among the products with the largest increases were cactus paddles (+12.58% bw), melon (+7.74% bw), and chayote (+6.50% bw).

It is worth noting that this month electricity prices rose 17.64% MoM, related to the termination of the summer electricity subsidy program in 18 cities across the country.

Meanwhile, core inflation stood at 0.13% bw, slightly above our estimate of 0.11% bw. Within this component, goods rose 0.10% bw (vs. estimate 0.05% bw), while services increased 0.15% bw (vs. estimate 0.17% bw).

With this information, headline inflation decreased from 3.63% to 3.50% YoY in the second half of the month; the core component rose slightly from 4.24% to 4.32%, while the non-core component declined from 1.58% to 0.80%.

In this context, inflation has remained within Banco de México’s target range for the fourth consecutive month, and we expect this trend to continue toward year-end. Although Banxico adopted a more cautious tone regarding future adjustments in its statement, we maintain our expectation of another rate cut in December, which would bring the policy rate to 7.00% by year-end.