Banxico keeps interest rate unchanged: 11%; due to inflation

MEXICO CITY.- As analysts anticipated, the Bank of Mexico (Banxico) decided keep the interest rate unchanged at 11%due to the rise in inflation over the last four months.

The central bank considered a “restrictive” stance necessary and for the second consecutive time decided not to change the reference rate, after cutting it by 25 basis points in March.

Inflation reached 4.78% at an annual rate in the first half of June, higher than the 4.59% in the second half of May.

When will Banxico cut interest rates?

Now, the consensus of financial analysts anticipates a cut from 11% to 10.75% by Augustaccording to the most recent CitiBanamex survey of private sector specialists.

In its announcement, within market expectations, Banxico stated that the challenges and risks to inflation warrant continuing with a prudent management of monetary policy, since “the forecast horizon remains biased upwards.”

The decision, approved with 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%.

It was about the First cut since March 30, 2023 in the face of better inflation expectations at that time.

Banxico, in agreement with the Fed

On the other hand, it was in line with the Federal Reserve (Fed) of the United States, which on June 12 kept the rate at a range of 5.25 to 5.5% for the seventh time.

Analysts expected this resolution from Banxico after it was announced on Monday that the Mexico’s overall inflation rose in the first half of June to 4.78%, which represents a sustained increase since February.

“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,” Banxico said.

What is the inflation forecast for Mexico?

Likewise, the Governing Board maintained in 4% its forecast for general inflation average in the last quarter of 2024.

He also preserved his Expectation for the end of 2025when inflation would average 3%, the central bank’s target.

The Bank of Mexico anticipated that from now on it expects that the inflationary environment allows for discussion of rate adjustments reference.

Even the deputy governor Omar Mejia Castelazo voted to reduce the rate by 25 basis pointsup to 10.75%.

Upward risks for Mexico’s economy

As upward risks, Banxico stated the persistence of underlying inflationgreater exchange rate depreciation, higher cost pressures, climatic impacts, and escalation of geopolitical conflicts.

The Upcoming Monetary Policy Decision It will be on August 8th.

With information from El Universal and EFE