MEXICO CITY — The Bank of Mexico on Wednesday forecast that headline inflation likely peaked in the third quarter and was seen declining throughout the remainder of this and next year, while also projecting stronger economic growth for 2022 and 2023.
The Mexican central bank, known as Banxico, said headline inflation was expected to begin dropping from the fourth quarter and present “more noticeable decreases throughout 2023,” outlining the projections in its quarterly report.
Official data showed Mexico’s annual headline inflation hit 8.14% in the first half of November, down from 8.53% a month earlier, while the core price index, which strips out some volatile food and energy prices continued to trend up, reaching 8.66% on an annual basis.
Core inflation, which Banxico board member Jonathan Heath dubbed the bank’s biggest concern, is seen starting to fall in the first quarter 2023, reaching the bank’s 3% target in the third quarter 2024.
Banxico forecast 2022 gross domestic product (GDP) growth of between 2.8% and 3.2%, up from its previous estimate of 1.7% to 2.7%.
For 2023, the bank forecasts GDP growth of between 1.0% and 2.6%, up from its prior estimate of 0.8% and 2.4%.
Mexico’s economy has grown for the past three quarters, expanding 0.9% in the third quarter with across-the-board growth despite the central bank’s aggressive monetary tightening cycle.
Banxico has raised the country’s benchmark interest rate 600 points since June 2021. (Reporting by Anthony Esposito and Isabel Woodford; Editing by Brendan O’Boyle and Elaine Hardcastle)