MEXICO CITY (Reuters) -Mexico's headline inflation likely slowed in July, although the core index likely remained above the official target, supporting expectations the central bank will slow its pace of interest rate cuts later this week, Reuters poll showed on Monday.
The median estimate from 13 analysts forecast headline inflation of 3.53% in the 12 months through July, which if confirmed would be its lowest reading since December 2020.
For core inflation, considered a better parameter for measuring
price trends because it eliminates highly volatile products, estimates indicate that it stood at 4.23%, slightly below June's 4.24% but still above the Bank of Mexico's target of 3%, plus or minus a percentage point.
The central bank last month lowered its benchmark rate by half a percentage point, although the decision by the five-member board of governors was not unanimous, after Deputy Governor Jonathan Heath voted to leave it unchanged.
According to the minutes from July's meeting, all four officials who backed the cut — the fourth consecutive cut of that magnitude — said the board may adopt a more gradual approach in future decisions, as inflation shows signs of slowing and economic activity proceeds at a sluggish pace.
Compared to the previous month, consumer prices are forecast to have risen by 0.28% in July, while for the core index an increase of 0.30% is expected, according to the survey. The official data will be released on Thursday, a few hours before the central bank's rate decision.
Another Reuters poll published on Friday showed that the market is widely discounting that the bank will announce a decrease of only 25 basis points in the cost of credit.
The central bank has cut its benchmark rate by 325 bps since early 2024 as part of a monetary easing cycle that began after the rate reached a record high of 11.25%.
(Polling by Gabriel Burín in Buenos Aires; Written by Noé Torres and Benjamín Mejías Valencia, Editing by Alistair Bell)
