Mexico Monetary Policy


Mexico: Banxico leaves rates unchanged but maintains bearish tone

October 14, 2011

At its 14 October meeting, the Central Bank (Banxico) voted unanimously to leave the monetary policy rate unchanged at the current record low of 4.50%. The decision was anticipated by most market analysts and follows the shift to a more bearish tone in its August meeting, when the Bank opened the way for interest rate cuts if conditions deteriorated significantly. With inflation developing favourably and currently sitting only a notch above the permanent inflation target of 3%, Banxico centred its attention on the evolution of inflation expectations. The Bank noted that lower global growth prospects and loose monetary conditions in developed economies may call for an interest rate cut going forward. However, most members of the monetary policy committee believe that there are upside risks to inflation stemming from the exchange rate remaining extremely depreciated and volatile. That said, all members of the committee stressed the importance of timely action, signalling that the Bank stands ready to adjust its current policy stance.


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