Mexico Monetary Policy


Banxico leaves interest rates unchanged

At its latest meeting on 8 July, the Central Bank (Banxico) left the policy rate unchanged at 4.50%, in a decision that did not surprise the market. Interest rates have been at the current record-low since July 2009. The Bank stated that economic activity seems to have decelerated, partly reflecting the effects of the Japanese disaster in the manufacturing sector. However, the Bank stressed that domestic spending has lost dynamism and thus the output gap is likely to close at a slower pace. Moreover, according to Banxico, a wide range of indicators on the domestic front are showing signs of looseness and thus no generalized price pressures are expected in the economy. Central Bank Governor Agustin Carstens stated in May that the Bank will not tighten the reins until convergence to the permanent inflation target of 3.0% is at risk.


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