Mexico City Post
The Bank of México reduced its benchmark interest rate by 25 basis points to 10.50% on Thursday, marking a second consecutive reduction as price pressures continue to ease in Latin America’s No. 2 economy.
In an optimistic tone, the bank hinted at potential future cuts to the key borrowing rate. The decision was not unanimous among the central bank’s five-member governing board, with Deputy Governor Jonathan Heath voting against the cut and opting instead for a hold at 10.75%.
According to analysts polled by Reuters, the majority had forecasted a 25-basis-point reduction.
In its announcement, Banxico noted that global inflation expectations have improved while core inflation rates are expected to decrease further. “The board predicts that the inflationary environment will allow additional reference rate adjustments,” the statement said, emphasizing however that the outlook for inflation continues to warrant a restrictive monetary policy stance.
México’s annual headline inflation decreased to 4.66% in the first half of September, marking its fourth consecutive fortnight of declines. Core inflation moderated to 3.95%, its lowest level since early 2021.
The bank revised its forecast for annual headline inflation in the fourth quarter downward to 4.3% and adjusted its expectation for core inflation to 3.8%. Following the rate decision, México’s peso strengthened by 0.4% before returning to a flat trading position.
Fitch Ratings director Carlos Morales stated that his agency expects upward inflationary pressures on the peso to persist due to uncertainty surrounding constitutional changes pursued by the government. Despite this, Fitch anticipates inflation overall to continue declining and for cheaper money going forward.
“We anticipate further rate cuts in the latter part of the year, with subsequent reductions occurring throughout next year,” Morales said.
The Bank of México lowered its benchmark interest rate by 25 basis points on Thursday, marking a second straight cut as price pressures continue to ease in Latin America’s No. 2 economy. The bank expressed a cautiously optimistic tone regarding potential future cuts to the key borrowing rate.
The latest decision was not unanimous among the central bank’s five-member governing board, with Deputy Governor Jonathan Heath voting against the reduction and choosing instead to keep the rate at 10.75%. Analysts polled by Reuters had forecasted a 25-basis-point cut.
In its statement announcing the decision, Banxico noted that global inflation expectations have improved while core inflation rates are expected to decrease further. “The board anticipates that the inflationary environment will allow additional reference rate adjustments,” the statement said, emphasizing however that the outlook for inflation continues to warrant a restrictive monetary policy stance.
México’s annual headline inflation slowed to 4.66% in the first half of September, marking its fourth consecutive fortnight of declines. Core inflation moderated to 3.95%, its lowest level since early 2021.
Banxico revised its forecast for annual headline inflation in the fourth quarter downward to 4.3% and adjusted its expectation for core inflation to 3.8%. Following the rate decision, México’s peso strengthened by 0.4% before returning to a flat trading position.
Fitch Ratings director Carlos Morales stated that his agency expects upward inflationary pressures on the peso to persist due to uncertainty surrounding constitutional changes pursued by the government. Despite this, Fitch anticipates inflation overall to continue declining and for cheaper money going forward.
“We anticipate further rate cuts in the latter part of the year, with subsequent reductions occurring throughout next year,” Morales said.
Source: Reuters
Source: México Daily Post from The México City Post on 2024-09-26 22:22:01
