The national statistics institute, Inegi, reported on Monday that the consumer price index rose 0.38% in January, bringing the annual inflation rate to 3.79%, up from 3.69% in December. Core inflation, which excludes volatile energy and food prices, saw a sharper monthly increase of 0.60%, pushing the annual core rate to 4.52%.

The uptick was largely driven by recent fiscal adjustments. Cigarette prices surged 14.51% during the month, while soda prices rose 5.53% following an increase in excise taxes. These hikes were partially mitigated by a seasonal dip in travel expenses and a reduction in the cost of fresh produce.

Banxico’s Policy Pivot

In response to the persistent price pressures, the Bank of Mexico recently halted a streak of 12 consecutive interest rate cuts. Policymakers are currently monitoring the dual impact of higher domestic taxes and new tariffs on imports from nations with which Mexico does not have a formal trade agreement.

The central bank has significantly revised its timeline for price stability. According to the bank’s latest statement, inflation is now expected to hit the 3% target in the second quarter of 2027, a sharp delay from the previous forecast of late 2024. Officials noted that while fiscal adjustments are already being felt, a comprehensive assessment of their long-term impact will require more data as it becomes available.