Mexico City, Mexico – Mexico’s inflation rate continued its downward trend, decelerating for the third consecutive fortnight in December, according to data released by the National Institute of Statistics and Geography (INEGI).

The annual inflation rate stood at 4.44%, marking a significant decrease from previous months. This positive development has been attributed to a decline in prices for several agricultural products, including papaya, onion, and green tomato.

The underlying inflation rate, which excludes more volatile items and government-regulated prices, also softened to 3.62%. This suggests that underlying price pressures are easing, providing further evidence of a cooling economy.

Central Bank's Response and Future Outlook

The Bank of Mexico has expressed optimism about the declining inflation rate and has hinted at potential interest rate cuts in the coming months. Analysts anticipate that the central bank will reduce its benchmark interest rate to 10% in an effort to stimulate economic growth.

However, experts caution that while the inflation outlook has improved, several factors could still influence the trajectory of prices. These include global economic conditions, exchange rate fluctuations, and wage pressures.

Alejandro Saldaña, chief economist at Grupo Financiero Ve por Más, noted that while inflation is expected to moderate further in 2025, it may still remain above the Bank of Mexico's target of 3%. Saldaña highlighted the potential impact of factors such as a weaker peso and rising wages on inflation.

Market Reactions and Implications

The news of declining inflation has been well-received by financial markets, with investors becoming more optimistic about the economic outlook. However, experts caution that the global economic environment remains uncertain, and geopolitical tensions could lead to increased volatility in financial markets.

Mexico's recent success in taming inflation is a positive development that could boost consumer confidence and stimulate economic activity. However, policymakers and businesses must remain vigilant, as both domestic and international factors could still impact price stability. The Bank of Mexico's decision to potentially lower interest rates could further support economic growth, but it is essential to strike a balance between stimulating the economy and maintaining price stability.