2026/03/09 | Julia Passabom, Mariana Ramirez & Ignacio Martínez
Bi-weekly headline CPI for the second half of February was 0.34%, above the Bloomberg median of 0.23% and our call of 0.18%. In contrast, core CPI rose by 0.17%, in line with market expectations and our call (0.18%). Within the core component, tradables rose 0.10% 2w/2w, with the food subcomponent rising 0.15% and non-food increasing 0.06%. Meanwhile, core services advanced 0.24% 2w/2w, with housing, education and other categories increasing by 0.20%, 0.10%, and 0.29%, respectively. Non-core CPI recorded a 0.91% rise, the highest inflation since the second half of October 2024, driven by food prices in products such as tomatoes, potatoes, green tomatoes, and lemons, while energy and tariff inflation fell by 0.01% due to deflation in LP domestic gas and gasoline.
In annual terms, headline inflation was 4.02% in February, above the upper bound of Banxico’s target range since June 2025. Core CPI was 4.50%, with tradables at 4.55% (slightly down from 4.56%) and services at 4.45% (slightly down from 4.48%). Core measures showed marginal relief: core CPI was at 4.7% 3MMA SAAR, with tradables at 5.0% and services at 4.4%. Within services, other service categories showed a slightly better performance (5.0% vs. 5.3% in January).
Our take: Today’s report showed an upside surprise for the non-core component, while core inflation did not exhibit second-round effects from the increase in excise taxes. Regarding the recent geopolitical events, the impact of higher oil prices on inflation is limited, as the government provides a gasoline subsidy and has a maximum price agreement with the fuel distribution sector (24 pesos per liter). We estimate that a 10% increase in oil prices raises inflation by 0.1 pp in the next six months. Additionally, although higher oil prices affect the real exchange rate, the correlation is low and has nearly zero pass-through to inflation, especially in the context of a negative output gap. Considering these elements, we anticipate that Banxico will cut the interest rate in 25-bp in the next meeting (March 26) and may continue with its dovish stance in upcoming meetings.
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