He Bank of Mexico (Banxico) considered this Thursday that it will be necessary to maintain a monetary politics “prudent” in view of “the prospect that the effects of inflationary shocks will take longer to dissipate.”
The Governing Board, in a document“opined that challenges and risks persist that warrant continuing with prudent management of monetary policy”and “took into account the expectation that the effects of the shocks will affect inflation for longer than previously anticipated.”
The minutes correspond to the meeting of May 9, when the Governing Board kept the interest rate unchanged in the eleven%, in contrast to the 25-point cut it made on March 30, the first adjustment after maintaining it for almost a year at a record level of 11.25%.
In the text, the central bank argued that the majority of its members “considered that the balance of risks for the expected trajectory of the inflation “In the forecast horizon it remains biased upwards.”
“Everyone emphasized that, given the prospect that the effects of inflationary shocks will take longer to dissipate, the forecasts for general and core inflation were adjusted upwards”he indicated.
At the meeting, the Governing Board worsened its forecast for general inflation by the end of 2024, estimating that it will average a 4% in the last quarter, above the previous projection of the 3.6%.
Even so, he reduced his expectation for the end of 2025, when inflation would average a 3%the central bank’s goal.
As upward risks, he stated the persistence of underlying inflation, exchange rate depreciation, greater cost pressures, climate impacts, and escalation of geopolitical conflicts.
The document is released hours after the National Institute of Statistics and Geography (Inegi) published that Mexico’s general inflation rose in the first half of May to 4.78% annual, its second highest level of the year due to the rise in prices, in particular, of food.
The next monetary policy decision will be on June 27.
In addition to inflation, the majority of the Governing Board indicated that the growth of 0.3% quarterly and 1.6% year-on-year gross domestic product (GDP) for the first quarter of the year “showed that the weakness in economic activity registered in the last quarter of 2023 extended to the first quarter of 2024.”
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Source: Gestion
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