The Bank of Mexico (Banxico) decided to keep its interest rate unchanged at 11%, halting its recent easing cycle.
This move aligns with the expectations of many analysts surveyed by Citibanamex.Banxicos monetary policy committee unanimously chose this course, emphasizing the central banks careful approach to persistent inflation risks, despite some positive signs of disinflation.Following this announcement, the Mexican peso gained 0.37% against the United States dollar, trading at 16.83 pesos per dollar.Banxico began raising rates in June 2021, starting at 4.25%.
Over 15 consecutive hikes, rates reached a record 11.25% by March 2023.In March 2024, Banxico began reducing rates with a modest 25-basis-point cut, signaling the start of a gradual rate-lowering cycle.Banxico Holds Interest Rate Steady at 11% Amid Inflation Concerns.
(Photo Internet reproduction)However, inflation remains a concern.
In April, inflation data from the National Institute of Statistics and Geography (INEGI) revealed that prices rose for the second consecutive month, surpassing expectations.Headline inflation increased mainly due to spikes in non-core items like tomatoes and serrano peppers.
Meanwhile, core inflation continued its downward trend.Banxico Holds Rate at 11%Carlos Capistrn, chief economist for the Bank of America covering Mexico and Canada, noted Banxicos decision to hold the rate at 11% was widely expected.He explained that Banxicos March cut reflected its belief that the real interest rate was too high relative to the neutral rate.This decision was made based on past rates when inflation stood between 4% and 5%.Banxicos decision to maintain the rate reflects the banks goal to ensure stable prices while carefully managing inflation expectations.Capistrn believes the central bank will gradually lower rates, aiming for a policy rate of 8% by the end of 2025.By remaining cautious, Banxico seeks to balance inflation control with economic growth.
This helps stabilize Mexicos financial outlook in uncertain global markets.