Mexico’s core inflation rate, which excludes volatile food and energy prices, rose to 4.28% year-over-year in October 2025. This figure slightly exceeds the 4.23% recorded in September and continues a steady increase from the 3.65% low seen in March 2025. The data, sourced from the Sigmanomics database, reflects ongoing inflationary pressures despite a stable macroeconomic backdrop.

Drivers this month

• Shelter costs contributed approximately 0.20 percentage points to the increase.
• Transportation services saw a moderate rise, adding 0.10 percentage points.
• Used vehicle prices stabilized, contributing marginally to the overall core inflation.

Policy pulse

The current reading sits above Banco de México’s inflation target midpoint of 3%, signaling persistent inflationary pressures. The central bank has maintained a cautious stance, keeping the benchmark interest rate steady at 11.25% since mid-2025 to balance growth and inflation risks.

Market lens

Immediate reaction: The Mexican peso (MXNUSD) depreciated slightly by 0.15% within the first hour post-release, while 2-year government bond yields edged up by 5 basis points, reflecting modest inflation concerns among investors.

Core inflation is a critical gauge of underlying price trends in Mexico’s economy. The 4.28% YoY rate in October 2025 compares with a 12-month average of 3.95%, indicating a gradual but persistent rise. This trend aligns with broader macroeconomic indicators, including steady GDP growth of 2.10% in Q3 2025 and a stable unemployment rate near 3.70%.

Monetary Policy & Financial Conditions

Banco de México’s current monetary policy stance remains restrictive, with the policy rate held at 11.25%. Inflation expectations for 2026 hover around 3.50%, suggesting the central bank anticipates a slow easing of price pressures. Financial conditions have tightened moderately, with credit spreads widening slightly amid global uncertainty.

Fiscal Policy & Government Budget

The Mexican government continues fiscal consolidation efforts, targeting a primary surplus of 1.20% of GDP in 2025. Public spending remains focused on infrastructure and social programs, but tax reforms aim to improve revenue collection without stoking inflation further.

External Shocks & Geopolitical Risks

Global commodity price volatility and supply chain disruptions persist as risks. Additionally, geopolitical tensions in North America and trade uncertainties with key partners like the US and China could impact inflation dynamics through import prices and investment flows.

Drivers this month

• Shelter inflation accelerated to 5.10% YoY, up from 4.90% in September.
• Transportation services inflation rose to 3.80% YoY, reflecting higher fuel and maintenance costs.
• Core goods inflation remained stable at 3.50% YoY, indicating steady consumer demand.

Policy pulse

Banco de México’s inflation target of 3% remains challenged by the current core inflation trajectory. The central bank’s forward guidance suggests a cautious approach to rate cuts, with potential hikes if inflation accelerates further.

Market lens

Immediate reaction: The MXNUSD currency pair weakened modestly, while 2-year yields climbed, reflecting investor caution. Inflation-linked bonds saw increased demand, signaling hedging activity.

Looking ahead, Mexico’s core inflation rate faces a mix of upward and downward pressures. The baseline scenario projects inflation stabilizing near 4.20% through Q1 2026 as supply constraints ease and monetary policy effects materialize.

Bullish scenario (20% probability)

Stronger-than-expected fiscal stimulus combined with a rebound in domestic demand could push core inflation above 4.50%, prompting Banco de México to consider further rate hikes.

Base scenario (60% probability)

Gradual easing of supply bottlenecks and stable commodity prices keep inflation around 4.20%, allowing the central bank to maintain current rates with a watchful eye on inflation expectations.

Bearish scenario (20% probability)

Global economic slowdown and improved trade conditions reduce inflationary pressures, bringing core inflation down toward the 3.50% target by mid-2026, potentially enabling rate cuts.

Structural & Long-Run Trends

Mexico’s inflation dynamics are increasingly influenced by structural factors such as urbanization, wage growth, and evolving consumption patterns. Long-term inflation expectations remain anchored but require vigilance amid external shocks and fiscal policy shifts.

Mexico’s October 2025 core inflation rate of 4.28% underscores persistent price pressures amid a complex macroeconomic environment. While monetary policy remains vigilant, external risks and structural trends complicate the inflation outlook. Market reactions suggest cautious sentiment, with investors balancing inflation risks against growth prospects. Policymakers must navigate this delicate balance to sustain economic stability and inflation control.

Key Markets Likely to React to Core Inflation Rate YoY

The core inflation rate is a key driver for Mexican financial markets, influencing currency, bond yields, and equity valuations. The following symbols historically track inflation trends closely:

• MXNUSD: The Mexican peso’s exchange rate reacts sensitively to inflation data and monetary policy shifts.
• BIMBOA.MX: A major consumer goods stock, sensitive to inflation-driven input costs and consumer demand.
• WALMEX.MX: Retail sector stock impacted by inflation’s effect on purchasing power.
• BTCUSD: Bitcoin often acts as an inflation hedge, with price movements reflecting inflation sentiment.
• USDMXN: The inverse of MXNUSD, also highly responsive to inflation and monetary policy.

FAQs

What is the current Core Inflation Rate YoY for Mexico?

The latest figure is 4.28% as of October 2025, slightly up from 4.23% in September.

How does core inflation affect Banco de México’s policy?

Core inflation above the 3% target prompts cautious monetary policy, with the central bank maintaining high interest rates to control price pressures.

What are the main risks to Mexico’s inflation outlook?

Risks include external shocks like commodity price volatility, geopolitical tensions, and domestic fiscal policy shifts.

Key takeaway: Mexico’s core inflation is trending upward, challenging policymakers to balance inflation control with growth support amid external uncertainties.