Mexico’s core inflation rate on a month-over-month basis increased to 0.33% in October 2025, surpassing the market estimate of 0.32% and rising from 0.22% in September. This figure, sourced from the Sigmanomics database, reflects a moderate acceleration in underlying inflationary pressures after a summer lull. Compared to the 12-month average of approximately 0.36%, the current reading remains slightly below but signals a potential upward trend in core prices.

Drivers this month

• Shelter costs contributed 0.18 percentage points (pp), reflecting rising rental and housing service prices.
• Services excluding housing added 0.10 pp, driven by transport and communication sectors.
• Used car prices slightly eased, subtracting -0.05 pp from the core inflation basket.

Policy pulse

The 0.33% MoM core inflation rate remains above the Bank of Mexico’s target midpoint of 3% annual inflation, implying continued pressure on monetary policy. The central bank’s recent rate hikes appear justified, though the pace may moderate if inflation stabilizes.

Market lens

Immediate reaction: The Mexican peso (MXN) appreciated 0.30% against the USD within the first hour post-release, reflecting market confidence in Mexico’s inflation management. Short-term yields on 2-year government bonds rose by 5 basis points, signaling expectations of sustained monetary tightening.

Core inflation is a critical gauge of underlying price trends, excluding volatile food and energy components. Its recent trajectory in Mexico has been shaped by a mix of domestic demand, wage growth, and imported inflation pressures. The Sigmanomics database shows that the core inflation rate MoM averaged 0.39% in July 2025, peaked at 0.49% in May, and bottomed at 0.22% in September before rebounding in October.

Monetary Policy & Financial Conditions

The Bank of Mexico has maintained a hawkish stance since early 2025, raising the benchmark interest rate to 11.25% to anchor inflation expectations. Financial conditions remain tight but supportive of growth moderation. Credit growth has slowed to 4.10% YoY, consistent with the central bank’s inflation-targeting framework.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary, with the government targeting a 2.50% of GDP deficit in 2025. Public investment in infrastructure and social programs supports domestic demand but risks adding inflationary pressures if not carefully managed.

External Shocks & Geopolitical Risks

Global commodity price volatility and US-Mexico trade dynamics continue to influence inflation. Recent geopolitical tensions in energy markets have kept fuel prices elevated, indirectly affecting core inflation through transport costs.

Figure 1 illustrates the monthly core inflation rate from April to October 2025. The upward tick in October contrasts with the downward trend observed in August and September, suggesting renewed inflationary pressures in key sectors.

Market lens

Immediate reaction: The MXN currency strengthened by 0.30% against the USD, while 2-year government bond yields increased by 5 basis points, reflecting market anticipation of continued monetary tightening.

Looking ahead, Mexico’s core inflation trajectory depends on several factors. The base case scenario (60% probability) envisions a gradual moderation to 0.25%-0.30% MoM by year-end, supported by stable commodity prices and cautious monetary policy. In this scenario, the Bank of Mexico may pause rate hikes but remain vigilant.

Bullish scenario (20%)

Core inflation accelerates above 0.40% MoM due to stronger wage growth and persistent supply bottlenecks. This would prompt further rate increases, potentially pushing the benchmark rate above 11.50%.

Bearish scenario (20%)

External shocks ease, and domestic demand softens, driving core inflation below 0.20% MoM. This could allow the central bank to consider rate cuts in early 2026.

Risks & Opportunities

• Upside risks include renewed commodity price spikes and wage pressures.
• Downside risks stem from global economic slowdown and easing supply chain disruptions.
• Fiscal discipline and trade stability remain key to inflation control.

Mexico’s October 2025 core inflation rate MoM of 0.33% signals persistent underlying price pressures despite recent moderation. The Bank of Mexico faces a delicate balancing act between containing inflation and supporting growth amid external uncertainties. Financial markets have priced in continued policy vigilance, reflected in bond yields and currency strength. Structural trends such as urbanization and wage growth will continue to shape inflation dynamics in the medium term.

Policymakers should prepare for a range of scenarios, maintaining flexibility to respond to evolving inflation signals. Close monitoring of core inflation components, especially shelter and services, will be critical. The interplay of fiscal policy, external shocks, and monetary stance will define Mexico’s inflation path through 2026.

Key Markets Likely to React to Core Inflation Rate MoM

The core inflation rate MoM in Mexico is a vital indicator for several markets. The Mexican peso (MXNUSD) typically reacts to inflation surprises, influencing currency traders and import-export businesses. Government bond yields, such as the 2-year MXGB2Y, track inflation expectations closely. Equities like GMEXICOB reflect investor sentiment on economic stability. Additionally, the USD/MXN forex pair is sensitive to inflation data, affecting cross-border capital flows. Finally, crypto assets like BTCUSD often respond to macroeconomic shifts, including inflation trends, as alternative stores of value.

Insight: Core Inflation Rate MoM vs. MXNUSD Since 2020

Since 2020, the Mexican peso (MXNUSD) has shown a moderate inverse correlation with Mexico’s core inflation rate MoM. Periods of rising core inflation often coincide with MXNUSD appreciation, driven by expectations of tighter monetary policy. For example, the 0.49% peak in May 2025 aligned with a 1.50% MXNUSD gain over the same month. Conversely, inflation dips below 0.25% have corresponded with peso depreciation. This relationship underscores the peso’s sensitivity to inflation data as a barometer of economic health and policy direction.

FAQs

What is the Core Inflation Rate MoM for Mexico?

The Core Inflation Rate MoM measures the monthly change in prices excluding volatile items like food and energy, reflecting underlying inflation trends.

How does the Core Inflation Rate MoM affect monetary policy in Mexico?

Higher core inflation typically prompts the Bank of Mexico to raise interest rates to keep inflation near its 3% target, while lower rates may lead to easing.

Why is the Core Inflation Rate MoM important for investors?

It signals inflation trends that influence currency values, bond yields, and equity markets, helping investors anticipate policy moves and economic conditions.

Final takeaway: Mexico’s October core inflation rebound to 0.33% MoM highlights persistent price pressures, necessitating cautious but firm monetary policy to anchor inflation expectations amid external uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.