Mexico’s annual inflation rate fell to 3.37% in June, the lowest since 2020 and well below the 3.5% median forecast of analysts surveyed by Bloomberg, the national statistics institute reported on Thursday. The reading, down from 3.94% in May, marks a second consecutive month of deceleration and brings the headline figure back within the central bank’s target range of 3% plus or minus one percentage point. President Claudia Sheinbaum publicly celebrated the data, calling it “even better than we said yesterday.”

The decline was driven almost entirely by the non-core component, which dropped to 2.04% year-on-year as prices of volatile agricultural goods collapsed. Tomato prices fell 39% month-on-month, and chillies dropped over 40%, as harvests from new growing regions entered the market, unwinding a supply shock that had pushed headline inflation to a peak in March. Core inflation, which strips out energy and fresh food, eased only marginally to 4.03% from 4.10%, remaining stubbornly above target. One Banxico deputy governor noted in the minutes of the June meeting that the median of long-term inflation expectations had risen to its highest since March 2019, with some measures stabilising around 3.5–3.8%.

Banxico held its benchmark rate at 6.50% in June, with Governor Victoria Rodríguez Ceja describing the pause as having “no predefined duration” and appropriate for assessing whether disinflationary trends will persist. Economists in Mexico City see the sharp headline drop as strengthening the case for a more dovish stance, with some pointing to a possible rate cut in September if the trend holds through July and August. However, the minutes also revealed concern about persistent services inflation, cost pass-through, and external risks including trade-policy disruptions and peso depreciation. The economy contracted 0.6% in the first quarter, which is expected to dampen demand-side pressures, yet the central bank does not forecast inflation converging to the 3% target until the second quarter of 2027.

Elsewhere in Latin America, Argentina’s inflation in dollars has risen 3.5% since President Javier Milei took office, though the country became 8.3% cheaper relative to the regional average, according to a Fundar study. Monthly inflation there is projected to have dipped below 2% in June for the first time since August 2025, with private estimates clustering around 1.8–1.9%, though a weekly food-price spike of 2.4% in early July, led by meat and vegetables, introduces fresh uncertainty. In Egypt, urban consumer inflation slowed to 14.3% in June, but core inflation accelerated to 14.3% from 13.8%, driven by housing and utility costs, sending a mixed signal to the central bank ahead of its next rate decision. The next milestone for Mexico will be the mid-July bi-weekly inflation print and the publication of Banxico’s full minutes, which may clarify the balance of opinion on the board regarding the timing of any easing.