Inflation in Mexico for the last month of 2019 was at its lowest level since 2016: 2.86% at annual rate, mainly due to a decline in energy and agricultural prices, consolidating the forecast that Mexico's central bank (Banxico) will follow the rate cut path on 2020.

According to the National Index of Consumer Prices (INPC) published on Thursday by INEGI (National Institute of Statistics, Geography and Informatics), in its monthly comparison, inflation was at 0.56%, under pressure from domestic LP gas prices, which rose 1.96%, and low-octane gasoline, at 0.34%.

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However, in the year-on-year comparison, the energy sector dropped by 0.54% in December, marking its lowest closure since 2002. The main factor that contributed to this decline was the drop in produce prices by 5.40%.

For Alejandro Saldaña, an analyst at Grupo Financiero Ve por Más, these data continue to support the forecast that inflation will remain in a range of around 3% for 2020; nonetheless, the risks will not dissipate. In particular, there are concerns about the increase in the minimum wage and the high uncertainty in the market for both external and internal factors.

As a result, economic specialists believe that the monetary policy that Banxico will take this year will be more expansive, but without abandoning caution regarding cuts. At the moment, three rates cuts are expected for 2020.