Mexico City (EFE).- The Bank of Mexico (Banxico) maintained the interest rate at 11% this Thursday, for the second consecutive time, given the rise in inflation in the last four months, which is why it considered a necessary “restrictive” posture.
In its announcement, within market expectations, the central bank “opinionated that the challenges and risks” on inflation “merit continuing with prudent management of monetary policy,” considering that “the expected trajectory for inflation in the forecast horizon remains biased upwards.”
The decision, approved by four votes in favor and one against, was similar to that of May 9 and contrasted with that of March 21, when the Governing Board reduced the interest rate by 25 basis points to 11%, the first cut since March 30, 2023, given better inflation expectations at that time.
On the other hand, it was in tune with the United States Federal Reserve (Fed), which on June 12 kept the rate in a range of 5.25% to 5.5% for the seventh time.
Analysts expected this resolution from Banxico after it was reported on Monday that Mexico’s general inflation rose to 4.78% in the first half of June, which represents a sustained increase since February.
“The disinflationary process is expected to continue. Although the depreciation of the national currency has an upward influence on the inflation forecast, its effects are partly offset by those corresponding to the greater weakness of economic activity,” the autonomous body noted.
The bank’s forecast for Mexico
The Governing Board maintained its forecast for average general inflation at 4% for the last quarter of 2024. And it also preserved its expectation for the end of 2025, when inflation would average 3%, the central bank’s goal.
The central bank announced that “going forward, it expects that the inflationary environment will allow for discussion of adjustments to the reference rate.” Even Deputy Governor Omar Mejía Castelazo voted to reduce the rate by 25 basis points to 10.75%.
As upward risks, Banxico stated the persistence of underlying inflation, greater exchange rate depreciation, greater cost pressures, climate impacts, and escalation of geopolitical conflicts.
The next monetary policy decision will be on August 8.
