The Bank of Mexico (Banxico) kept the interest rate at 11 percent, given the high prices of goods and services that persist in the Mexican economy.
In announcing its monetary policy decision, Banxico’s Governing Board stressed that the challenges and risks to inflation warrant continuing with a prudent and restrictive management of the interest rate.
According to the central bank, under the current economic outlook, general inflation is expected to converge to the specific goal of three percent until the fourth quarter of 2025.
“With this decision, the monetary stance remains restrictive; going forward, (the Governing Board) expects that the inflationary environment will allow for discussion of adjustments in the reference rate,” Banxico said in its statement.
Banxico’s decision was not made unanimously, since the only one who voted to reduce the reference by 25 basis points was Deputy Governor Omar Mejía.
For Carlos Morales, director of sovereign risk at Fitch Ratings, Banxico’s position was predictable in light of the market volatility following the June 2 election results in Mexico.
“We expect inflation to resume its decline, given the relatively restrictive monetary policy stance we adopted recently,” the analyst said in a report.
Following Banxico’s announcement, Fitch Ratings expects the reference rate to close the year at a level of 10.5 percent, which could trigger a series of cuts with “relative caution” in the medium term.
In the first half of June, general inflation reached a level of 4.78 percent, according to the National Institute of Statistics and Geography (INEGI). During this period, the indicator was pressured mainly by higher prices of fruits and vegetables.
Banxico warned that among the upward risks for inflation are greater exchange rate depreciation, more cost pressures, climate impacts and an escalation in current geopolitical conflicts.
On the contrary, this variable could decrease if economic activity performs less well than expected, or if episodes of exchange rate volatility are lower than expected.
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“The actions implemented will be such that the reference rate is consistent, at all times, with the path required to promote the orderly and sustained convergence of general inflation to the three percent target within the expected time frame,” Banxico concluded.
2024-06-27 19:02:19
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