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Softer Mexico inflation data strengthens case for dovish Banxico stance
Societe Generale said June headline inflation fell to 3.37% year over year and core to 4.03%, with second bi-weekly readings near Banxico’s target range.
Societe Generale analysts Dev Ashish and Brendan McKenna said Mexico’s June inflation print surprised to the downside, with both headline and core measures moving close to Banxico’s target band. They pointed to weakening price momentum across components, arguing that services and core goods are being pressured by softer economic activity and disinflation trends. According to the note, headline inflation eased to 3.37% year over year and core inflation to 4.03% year over year in June. The analysts said the second bi-weekly reading showed headline at 3.18% year over year and core at 3.94% year over year, which they described as bringing both measures close to, or within, Banxico’s target range.
They attributed the decline in part to moderation in services inflation, excluding housing and education, which fell to 4.40%. Societe Generale also said core goods inflation eased to 3.45%, consistent with their view that weakening demand is starting to reduce domestic pricing power. While the analysts said the data strengthen the case for a more dovish Banxico, they still expect the policy rate to stay at 6.50% near term. They added that they now see a 40% probability of a cut in the third quarter of 2026 and outlined a potential easing cycle of 50 basis points by the first half of 2027 if inflation continues to surprise lower and growth remains weak.