Bank of Mexico (Banxico) cut the interest rate after keeping it unchanged for a year, marking the beginning of a cycle of reductions.
In the first half of Marchyear-on-year inflation of Mexico exceeded expectations, cementing the idea that the recent decline in lat the central bank’s key interest rate it would not mark the beginning of an aggressive cycle of cuts.
The general consumer price index stood at 4.48%, exceeding the 4.35% recorded in the second half of February. Although this is below the record high of 8.77% reached in 2022, according to official data published on Friday. Analysts expected a rate of 4.45%, according to a Reuters poll.
On the other hand, core inflation, which is considered a better indicator to track the trajectory of prices by eliminating high volatility products, unexpectedly increased to 4.69%, marking its second consecutive fortnight of increase.
BANXICO and the interest rate
Banco de México, with an inflation goal of 3%, reduced its reference rate for the first time since it began its monetary tightening policy in mid-2021. Although the decision was divided, it met market expectations. The institution stated that, despite the adjustment, its monetary stance remained restrictive and warned that it would consider the inflation outlook and the challenges that still persist in future decisions.
Only in the first 15 days of March, prices increased by 0.27%, while the underlying index registered an increase of 0.33%, according to available data. The most affected sectors during this fortnight were chicken, air transport and packaged tourist services, while onion, domestic LP gas and nopales experienced decreases in their prices.
The institution reduced the rate by 25 basis points, leaving it at a level of 11% from the previous 11.25%, according to its monetary policy announcement on Thursday, March 21. However, the decision did not have the unanimity of the five members of the Governing Board.
Source: Ambito
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