Banxico faces uncertainty ahead of meeting, according to governor

Mexico’s central bank’s next monetary policy decisions will be data-driven and dependent on any additional price shocks, Governor Alejandro Díaz de León said, indicating that policymakers are not committed to an established path for Interest rates.

“We are neither pointing in a certain direction nor ruling out any direction”, Diaz de León said in a telephone interview. “We are indicated that everything will be a function of how the information is identified and the additional shocks that we can identify.”

Banxico, as the central bank is known, raised the reference rate by a quarter of a point to 5% on Thursday, opting to maintain the same pace of monetary policy adjustment as in its three previous decisions, despite the fact that inflation increased more than double the bank’s goal, at 6.2%.

On the contrary, other Latin American countries, including Chile, Colombia and Brazil, have chosen to accelerate the pace of their rate increases as the global supply crisis and domestic factors have caused inflation to rise.

Díaz de León said that the fact that Mexico’s borrowing costs are higher than those of most countries in the region, apart from Brazil, shows the importance of considering not only the speed with which the central bank takes them on. has risen, but also how overall country rates compare.

Mexico did not cut its rate as much as other countries during the pandemic, allowing a more gradual pace of adjustment now, he added.

“Mexico was left with an interest rate level that was better aligned with the challenges we have seen in recent months“, said.

The next decision on rates, which will be Díaz de León’s last before he leaves office at the end of the year, is scheduled for December 16. He is then expected to hand over the board’s leadership to former Finance Secretary Arturo Herrera, who was chosen by President Andrés Manuel López Obrador to be governor but still needs to be ratified by the Senate.

Díaz de León said in the interview that he hopes the bank will stick to its current goals after his departure.

“Obviously there may be additional shocks, or additional complexity to what we face in the next fortnight leading up to the December decision.”Díaz de León said during the interview. “We will be attentive to see if in the margin of these shocks they already give way or if there are additional shocks, and this will obviously be important.”.

Banxico is likely to revise its economic growth estimates in its next quarterly inflation report to be published on December 1 to take into account the effect of the unexpected contraction in the third quarter, Díaz de León said. His current estimate, released in August, is for a 6.2% increase in gross domestic product this year and 3% by 2022.