The Bank of Mexico (Banxico) this Thursday kept the interest rate unchanged at 11.25%the highest level in its history, in a decision that broke with fifteen consecutive increases given the high levels of inflation.
In its announcement, the central bank “He considered that a phase of disinflation has been entered due to the fact that various pressures have been mitigated. However, he judged that these continue to affect inflation, which remains high, and that the inflationary panorama continues to be very complex.
The brake on increases, which began during the COVID-19 pandemic in June 2021 and accumulate 725 basis points, was unanimously approved and occurred despite the 25-point increase announced by the United States Federal Reserve (Fed) two weeks ago.
Even so, the announcement was within market expectations after revealing that general inflation fell in April to 6.25%, its lowest level since October 2021, after registering a rate of 7.82% in December, its highest rate for a closing of year so far this century.
“Since the last monetary policy meeting, annual headline inflation has continued to decline. In addition, in its last reading, core inflation showed a more marked reduction than in previous months”argued the bank’s Governing Board.
Banxico now expects headline inflation to average 4.7% per year in the last quarter of 2023 after the previous expectation of 4.8%.
While for the end of 2024 he maintained the expectation at 3.1%.
“The inflation outlook will be difficult and uncertain throughout the entire forecast horizon, with upside risks. Given this, in order to achieve the orderly and sustained convergence of general inflation to the 3% target, (the bank) considers that it will be necessary to maintain the reference rate at its current level for a prolonged period.”warning.
As upward risks, the Governing Board stated the persistence of subjacent inflation at high levels, exchange rate depreciation in the event of international financial volatility, higher cost pressures, and pressures on energy or agricultural prices.
As positive factors, he maintained that, since the last decision on March 30, “The Mexican peso appreciated. Economic activity has shown resilience in the face of a complex external environment, and in the first quarter of 2023 it increased its rate of expansion. The labor market shows strength.
Banxico’s next decision will be revealed on June 22.
Source: EFE
Source: Gestion
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