Mexico Monetary Policy


Banxico leaves rates unchanged following unexpected cut in March

At its 26 April meeting, the Central Bank (Banxico) left the monetary policy rate unchanged at 4.00%. The decision was in line with market expectations and follows a 50-basis-point cut in its previous meeting, which the Bank had emphasised was a one-off move and not the beginning of an easing cycle.

Banxico stated that despite better-than-expected growth in the United States, the global economy continues to show signs of weakness, prompting a deceleration of economic activity in Mexico. On the inflation side, Banxico stressed that the recent rise seen in consumer prices is mainly due to temporary shocks and, thus, a downward trend should start in June, with inflation falling to between 3% and 4% by the end of the year. Moreover, the Bank noted the improvement in local financial markets resulting from increasing capital inflows, which have led to an appreciation of the currency and to lower market rates.

Against this backdrop, monetary authorities stated that they remain vigilant on possible second-round effects of the rise in inflation seen in recent months, as well as on the evolution of its monetary policy stance relative to that of other economies.

LatinFocus Consensus Forecast panellists currently expect the Bank to stay put this year and leave interest rates at 4.00%. For next year, most panellists expect Banxico to tighten the reins, resulting in a 4.16% year-end projection.


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Mexico Monetary Policy Chart

Mexico Monetary Policy April 2013

Note: Banxico target rate (Tasa objetivo de fondeo bancario) in %.
Source: Mexico Central Bank (Banxico).

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