Mexico Monetary Policy


Banxico still on hold but remains dovish

At its 2 December meeting, the final one for this year, the Central Bank (Banxico) voted to leave the monetary policy rate unchanged at the current record low of 4.50%. Despite Banxico's dovish previous statement, the current move was widely expected amid the recent peso depreciation and heightened volatility in financial and exchange rate markets. The Bank stated that the external environment continues to deteriorate, mainly driven by the lack of solutions to the European sovereign debt crisis. Moreover, monetary authorities expressed their concern about the possible effects of the recent peso depreciation on inflation, although acknowledging that the pass-through of exchange rate movements into inflation has been lower in recent years. That said, the Bank maintained an overall dovish stance, suggesting that it is willing to act if conditions so demanded.


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