🇲🇽❗️Cable FX Macro Weekly Note: Mexico Bi-Weekly Consumer Prices

**As seen in Risk In The Week report 10/20/23, subscribe at cablefxm.co.uk/reports

Bi-weekly headline prices increased by 4.47% Y/y, faster than the prior read. Core prices eased to 5.74% Y/y from the prior 5.78%, this was slightly above the consensus of 5.73%. Goods prices extended its deflationary trend to rise by 6.04%, the lowest figure since September 2021. Services accelerated to 5.37% Y/y, this was the fastest reading in months. Agricultural products rose by 2.93% Y/y, the vegetables and fruits component increased by 6.51% Y/y, this is, however, a volatile constituent in the CPI. Energy prices deflated by 3.91% Y/y, the item is off the lows seen during the summer but in line with the deflationary trend seen since 2022. We remind you that Banxico sees headline prices at 3.10% in 2023 and 1.80% in 2024. Board members expect the previous tightening to continue to filter through, the policy rate stands at 11.25%. Deputy Governor Heath recently stated that they are focused on the core metric. Other officials have seen the recent rise in oil prices as a factor that could affect Mexican inflation, they added that the balance of inflation risks remains biased to the upside. The most recent economists survey compiled by Citi disagrees with Banxico’s optimism on prices. Economists expect Mexico headline CPI at 4.71% this year before slowing to 4.0% in 2024. Also, they saw the central bank slashing the policy rate by 25bps in March, their rate cut call was pushed forward from February. The desk at Deutsche Bank said that both core and headline inflation remain on a downtrend, however, they flagged that the September data showed core prices could be approaching its trough for the year. Deutsche Bank expects Mexico core CPI to end this year at 5.10%, which is about 6/10s of a percent slower than the last read. The desk at Deutsche expects Banxico to start policy normalization in March of next year.