Inflation Eases to 3.37% in June; Fruit and Vegetable Prices Drop and Banxico Buys Time

Falling agricultural prices pushed inflation to its lowest level in years, although core inflation still points to persistent pressure in services.

Mexico’s inflation came in lower than expected in June, posting a monthly change of -0.27% and bringing the annual rate to 3.37%, according to INEGI. The reading placed the National Consumer Price Index (INPC) within the Bank of Mexico (Banxico) target range of 3% +/- one percentage point, at a time when markets remained focused on the path of prices and monetary policy.

The inflation relief was driven mainly by a sharp adjustment in agricultural products, particularly fruits and vegetables. Among the most notable declines were tomato (-38.98% m/m), eggs (-7.21%), serrano peppers (-26.88%), and poblano peppers (-40.43%). Moves like these often reflect seasonal patterns, harvest cycles, and supply conditions, so they tend to be volatile and don’t necessarily signal a straight-line trend for the rest of the year.

The figure was better than analysts had forecast in expectations surveys: a smaller monthly decline had been anticipated, while the observed drop was steeper. On a year-over-year basis, headline inflation cooled meaningfully compared with the prior year, partly due to a tougher base of comparison and the normalization of some food-related prices.

That said, the picture isn’t entirely uniform. Core inflation—which excludes agricultural products and energy due to their high volatility and is typically the key benchmark for gauging more persistent pressures—rose 0.24% month over month and came in at 4.03% year over year. This means that even as the headline index slows, some everyday spending categories are still rising faster than desired.

Breaking it down, goods increased 0.18% month over month and services 0.30%. In processed foods, beverages, and tobacco, the monthly increase was 0.35%, with an annual rate of 5.08%. Services held at a 4.49% annual pace, reflecting pressure in categories influenced by wages, rents, operating costs, and domestic demand—such as housing, restaurants, and other personal services.

By contrast, the non-core component was the month’s main “anchor”: it fell 2.04% month over month, and its annual rate stood at 1.11%. Within it, agricultural products dropped 4.59% on the month, and fruits and vegetables in particular fell 8.99%. This dynamic also showed up in the minimum consumption basket, which declined 0.66% month over month and posted annual inflation of 3.04%—a relevant data point given its connection to spending among lower-income households.

What does it mean for Banxico and for consumers’ wallets?

The slowdown in the INPC strengthens the case that the most acute phase of the inflation episode is already behind us, but it doesn’t eliminate the challenges for monetary policy. In recent months, Banxico has emphasized that even with headline inflation declining, risks remain tilted to the upside—especially due to core inflation’s persistence and factors that could reignite pressures, such as climate shocks affecting harvests, logistics costs, bouts of financial volatility, and external shocks.

With the policy rate at 6.50%, the central bank is maintaining a stance aimed at cementing inflation’s convergence to target, while keeping an eye on overall economic activity. For households, June’s data translate into a noticeable break in fresh products, but day-to-day costs are still being pushed up by services and processed foods, which are less prone to sudden drops and tend to adjust more gradually.

Looking ahead, inflation’s trajectory will depend largely on whether agricultural prices hold on to part of the correction or rebound due to weather effects; on the path of services, where inflation is typically stickier; and on developments in energy prices and administered tariffs, which can add noise to the headline index. Within that balance, monetary policy will look for clear signs that core inflation is moving more decisively toward target before considering a shift in stance.

In short, June delivered a favorable read: headline inflation fell to 3.37% thanks to a steep drop in fruits, vegetables, and some staples. Still, the core component continues to reflect persistent pressure, so the challenge will be to sustain disinflation without relying solely on seasonal factors.