(Bloomberg) -- Mexico’s headline inflation sped up more than expected last month, likely cementing a rate hold at the central bank’s monetary policy meeting later on Thursday.

Consumer prices rose 4.65% in April from a year earlier, up from 4.42% in March, the National Statistics Institute reported Thursday. The reading was slightly above the 4.63% median estimate from analysts in a Bloomberg survey.

Core inflation, which excludes volatile items such as fuel and food and is closely watched by the central bank, slowed to 4.37% in April from a year ago, down from the 4.55% rise a month earlier and just under the 4.39% median estimate. 

After cutting interest rates in March to 11% from 11.25%, policymakers led by Governor Victoria Rodriguez emphasized that future adjustments will be gradual and evaluated one at a time. 

Read more: Mexico Cuts Key Interest Rate For First Time Since 2021 

“This is likely not the type of print that gives the central bank great comfort,” said Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc. “We expect the board to hold interest rates at 11%,” he said referring to today’s policy decision.

Lower prices of airfares and tourism packages as the holiday season ends possibly led to better-than-expected services inflation, Ramos said. Still, increases in the minimum wage remain a risk.

Central Bank

According to the minutes of the central bank’s last meeting, the discussion among policymakers repeatedly returned to their concern about inflation, especially in the services sector. Given the risks, board members called for small rate adjustments, cautioning against rapid reductions going forward. 

In an interview with Bloomberg News last month, Deputy Governor Irene Espinosa, the only board member who voted to keep the rate unchanged in March, said it’s too soon to talk about a prolonged easing cycle. In a separate interview, Deputy Governor Jonathan Heath said he also expecting a hold, with an unanimous vote. 

The bank might update its inflation estimates after today’s prints. Goods, together with food and beverages, were among the biggest drivers of consumer prices last month. Banxico, as the central bank is known, targets inflation at 3%, plus or minus one percentage point. 

“We are only now seeing data for the first quarter, but the bank’s estimates for underlying consumer prices seem a bit tight,” said Jessica Roldan, economist at Casa de Bolsa Finamex. “The board has pledged to be prudent, and it seems they would be comfortable sticking to that message.” 

The most recent Citi survey of local economists published Tuesday has Banxico cutting interest rates 25 basis points at its June meeting. The poll’s inflation estimate for the end of 2024 increased to 4.17% from 4.10% previously, while the end-2025 forecast was kept at 3.70%. 

--With assistance from Rafael Gayol and Robert Jameson.

(Updates with more details, economist comments throughout)

©2024 Bloomberg L.P.