2025/11/24 | Julia Passabom & Mariana Ramirez
Bi-weekly headline CPI for the first half of November was 0.47%, higher than Bloomberg’s market consensus of 0.41% but in line with our forecast. Core inflation came in at 0.04%, slightly below the market's expectations of 0.05% and below our forecast of 0.13%. Within the core component, tradable prices declined by 0.19% 2w/2w, down from the previous fortnight's +0.10%, due to deflation in both food and non-food merchandise, the latter explained by the start of the El Buen Fin discount season. Service prices increased by 0.25% 2w/2w, up from the previous data of 0.15%, driven by housing and other services (restaurants, professional services, and air transportation). The non-core component increased by 1.93% 2w/2w due to rises in tariffs with the withdrawal of summer subsidies and the latest increases in public transportation fees. Agricultural prices also rose, including both fruits and vegetables (1.34%) and livestock (0.27%).
In annual terms, headline inflation was 3.61% in the first half of November, remaining below the 4% threshold since the second half of April. Core CPI was stable at 4.32%, with tradables at 4.13% (down from 4.18%) and services at 4.50% (slightly up from 4.46%). Core measures continued to show relief at the margin: core CPI is at 3.68% 3MMA SAAR, with tradables at 2.91% and services at 4.52%. Within services, pressure continued in other service categories (5.61%) and education (7.21%), the latter affected by different dates in the 2025's school calendar.
Our take: Today’s report continues to show improvements in core inflation dynamics at the beginning of November, especially in tradables. We forecast CPI to end 2025 at 3.8% and 2026 at 3.7%. Regarding monetary policy, our scenario considers another 25-bp cut in December, leading to a year-end monetary policy rate of 7.0% in 2025. For 2026, we expect Banxico to be more dependent on CPI and FOMC dynamics. Currently, our scenario includes one more 25-bp cut in February, with the terminal rate reaching 6.75%. A pause in early 2026 is possible, reflecting the currently lower ex-ante real rate, short-term inflation risks in both core services and non-core components, and greater uncertainty surrounding the Fed’s rate trajectory.
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