Headline inflation in Mexico dropped to a 21-month low of 5.8% y/y in May and will continue to decline over the coming months. That said, the strong labour market and rapid wage growth mean that inflation is likely to stay above the central bank’s target range until at least late-2024. As a result, while the tightening cycle has ended, rate cuts are likely to come later and be more gradual than most anticipate.
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