Full Breakdown
Mexico's Inflation Trends and Economic Forecasts for 2026
1/8/2026, 11:34:24 PM
Inflation Eases to Five-Year Low
In December 2025, Mexico's inflation rate decreased to 3.69%, marking its lowest year-end annual rate in five years, according to the National Institute of Statistics and Geography (INEGI). This figure is a decline from 3.80% in November and below the 3.75% consensus forecast by analysts surveyed by Bloomberg. The annual headline inflation rate has remained below 4% for six consecutive months, the longest streak since mid-2019 to mid-2020. The last time the end-of-year inflation rate was lower was in December 2020, when it was recorded at 3.15%. Month-over-month inflation for December was 0.28%, the lowest for that month since 2012.
Core Inflation and Price Changes
The core inflation rate, excluding volatile food and energy prices, was reported at 4.33% in December, down from 4.43% in November. INEGI noted that processed food, beverages, and tobacco prices increased by 5.22% annually, while non-food goods rose by 3.51%. Services saw a 4.35% increase, and meat prices were up by 5.76%. Conversely, the prices of fruits and vegetables decreased by 5.62% due to improved drought conditions.
Economic Growth Projections
The latest Citi México Expectations Survey forecasts that Mexico's economy will grow by 1.3% in 2026, with predictions ranging from 0.6% to 1.8% among 35 participating banks and research organizations. The Mexican peso is expected to trade at 19 to the US dollar by the end of 2026, indicating a depreciation of over 5% from its current position. The federal Finance Ministry's growth prediction for 2026 is higher, estimating an expansion of 1.8% to 2.8%, driven by foreign investment, tourism related to the World Cup, and positive outcomes from the USMCA review.
Interest Rate Outlook
The Bank of Mexico has lowered its benchmark interest rate from 10% at the start of 2025 to 7% by year-end. The consensus among survey respondents is that the rate will further decrease to 6.5% by the end of 2026, with expectations of two additional 25-basis point cuts throughout the year. Only one institution, Santander México, predicts that the rate will remain unchanged at 7%.
Criticism and Concerns
Despite the positive trends in inflation, some analysts, including Gabriela Siller from Banco Base, caution that inflation could rise above 4% in 2026 due to various factors, including potential increases in energy prices and other economic pressures.
Conflicting Reports and Future Projections
The median forecast for Mexico's annual headline inflation rate at the end of 2026 is 4%, slightly higher than the 3.72% rate recorded in early December. Forecasts for inflation at the end of 2027 suggest a further decrease to 3.70%. The Bank of Mexico anticipates inflation will converge to its 3% target by the third quarter of 2026 and maintain that level through 2027.
Verbatim Quotes
This comprehensive overview highlights the current state of inflation and economic forecasts in Mexico, reflecting a cautious optimism tempered by potential challenges ahead.
