Mexico's annual inflation accelerated approximately in line with expectations in early September ahead of the central bank's interest rate decision on September 26.

Consumer prices rose 3.74% y/y in the first half of September compared with the same period a year earlier, according to the national statistics institute cited by El Financiero. The figure was slightly below analysts' median estimate of 3.75% surveyed by Bloomberg and above the most recent reading of 3.65%.

The key core gauge, which excludes volatile food and fuel prices and is closely watched by the central bank, barely moved, reaching 4.26% in the two-week period, the report said.

Mexico's central bank, Banxico, cut borrowing costs by a quarter percentage point to 7.75% on August 7, following four half-point cuts earlier in the year. The five-member board was divided, with one member calling for a pause.

Authorities expect inflation to reach their 3% target by the third quarter of next year, according to the publication. Annual monthly inflation peaked in May before declining in subsequent months and accelerating in August, fuelling debate about its trajectory.

Analysts surveyed by Bloomberg expect Banxico to reduce borrowing costs on September 26, for a tenth consecutive meeting, by another quarter point to 7.5%, the report said.

Bloomberg Economics predicts slow interest rate cuts during the remainder of 2025 and next year. After this week's vote, two more rate decisions will be taken this year: on November 6 and December 18.

Monetary policy easing could boost the economy in a year when the bank forecasts moderate growth, El Financiero reported. Banxico raised its economic growth forecast for this year to 0.6% in its central scenario, from 0.1% previously. The bank expects 1.1% economic growth next year.

Repeated threats by US President Donald Trump to impose tariffs have disrupted much of the investment planned for this year, though in the latest round of negotiations the Mexican government agreed to greater security coordination as part of its attempt to secure more favourable treatment than other countries, the report said.

The review of the USCMA free trade agreement between the United States, Mexico and Canada is also scheduled for 2026. Mexican Economy Secretary Marcelo Ebrard indicated the evaluation of trade agreement results will be conducted through December.

Consultations on the treaty have already begun in each country, with President Claudia Sheinbaum hosting Canadian Prime Minister Mark Carney last week for talks aimed at working out a common front in negotiations with Washington. According to forecasts cited by El Economista, the USMCA is likely to survive in modified form, with stricter rules of origin and reinforced labour and environmental provisions.