Inflation 1h – Dec

In the first half of December, inflation stood at 0.17% bw, below expectations, reflecting a normalization in prices following the “Buen Fin” effect and lower pressures in the agricultural component.

The figure surprised the market, coming in below our 0.24% bw estimate and the 0.32% bw expected by consensus.

Core inflation stood at 0.31% bw, below our 0.41% bw estimate, contributing 7 bp to our forecast error. This downside surprise was mainly driven by the non-food goods component, which posted an increase of 0.06% bw (vs. a 0.42% bw estimate), reflecting a normalization in prices after the rebound observed in the previous fortnight, when prices rose following the discounts associated with “El Buen Fin.”

Meanwhile, the non-core component came in at -0.30% bw (vs. -0.34% bw estimated). This outcome was driven by lower pressures on fruit and vegetable prices, which declined -1.54% bw and continue to benefit from favorable rainfall conditions throughout the year.

During the fortnight, the items with the largest upward contributions were air transportation (38.25% bw), green tomatoes (10.69% bw), and small eateries (0.44% bw), while on the downside, tomatoes (-4.84% bw), eggs (-2.50% bw), and chicken (-0.95% bw) stood out.

As a result, annual headline inflation declined from 3.99% to 3.72%, due to a base effect; core inflation eased from 4.54% to 4.34%, while non-core inflation fell from 2.18% to 1.71%.

Looking ahead to the first half of January, we expect inflation to increase above 4.0%, driven by the implementation of higher IEPS taxes and tariffs on imports from countries with which Mexico does not have a trade agreement.

In this context, we maintain our expectation of two rate cuts by Banco de México in the second half of 2026, which would bring the policy rate to 6.50% by year-end.