Electricity Rates and Transportation Push Inflation to 3.80% in November; Core Inflation Firmly at 4.43%
Mexico’s annual headline inflation rebounded to 3.80% in November, driven by increases in electricity, public transportation, and agricultural products, according to INEGI. The core inflation index—which excludes the most volatile prices and guides mid-term inflationary pressures—stood at 4.43% year-over-year, above the Bank of Mexico’s (Banxico) 3% target and outside its variability range.
On a monthly comparison, the National Consumer Price Index rose by 0.66%, the largest increase for a November since 2021. The non-core component climbed 2.28% month-over-month, reflecting the end of the summer subsidy on electricity rates in 11 cities, which resulted in a 20.70% spike in electricity and contributed 0.28 percentage points to the month’s inflation. Notable increases were also seen in collective public transportation (+4.90%) and tomatoes (+14.34%). In contrast, prices dropped for avocados, potatoes, bananas, and oranges.
Core inflation advanced 0.19% month-over-month. Within this, services rose by 0.39%, with persistent pressures in housing and eating out, while goods edged down by 0.03%, helped by a slowdown in processed foods and durable goods. Annually, services are growing at 4.49%, a pace that highlights the stickiness of this most inertial inflation component.
For Banxico, which operates with a 3% ±1 point target, the persistence of core inflation suggests caution. While headline inflation remains within the range, the disinflation process appears slower in services, a sector tied to labor costs, rents, and domestic demand. With the benchmark rate still in restrictive territory and inflation expectations relatively anchored, the room to cut interest rates in coming quarters will depend on further consolidation in core convergence, the exchange rate trajectory, and developments in administered prices.
Looking ahead, seasonal and administrative adjustments—such as updates to the Special Tax on Production and Services (IEPS) on fuels and certain tariffs and fees—typically cluster in upcoming months and may cause temporary noise in prices. In food, climate and logistics remain key risks due to their impact on fruits and vegetables, while energy volatility and electricity costs will continue to depend on supply and demand dynamics, generation and transmission capacity, and international prices.
On the real economy front, activity continues to receive support from formal employment, remittances, and the reconfiguration of supply chains that favors investment in manufacturing and related services. However, the strength of domestic demand, along with wage increases and bottlenecks in some urban services, may continue to fuel core inflationary pressures. At the same time, eventual fiscal consolidation and the normalization of public spending could moderate economic growth in 2025, contributing to disinflation, as long as there are no external shocks.
In summary, the November uptick is largely explained by non-core and seasonal factors, but the core rate at 4.43% shows that the final stretch toward the target will be gradual. Market attention will remain on services, early-year adjustments, and Banxico’s guidance, which is likely to maintain a cautious stance until there is strong evidence of a sustained move towards 3%.
Final note: Headline inflation accelerated again due to electricity and transportation, while core inflation remains high because of services. The outlook points to a slower disinflation, dependent on shocks in agriculture and energy, as well as the strength of demand. With the central bank focused on core inflation, the interest rate path will remain conditional on the persistence of services inflation and on potential fiscal and administratively-set price adjustments early in the year.
