Mexico: Banxico stays put, adopts neutral tone
June 7, 2013
At its 7 June meeting, the Central Bank (Banxico) maintained its monetary policy stance, leaving the overnight target interest rate unchanged at 4.00%. The Bank last adjusted interest rates at its 8 March meeting, when monetary authorities voted for a 50 basis-point cut.
Banxico noted that economic activity continued to decelerate, as domestic demand is weakening and external demand remains subdued. Against this backdrop, the Bank stressed that it does not expect demand-side inflationary pressures in the "foreseeable future". Furthermore, monetary authorities maintained that the rise in inflation seen in recent months reflects transitory and one-off factors and thus should start trending down in June, with annual consumer prices falling to between 3% and 4% by the end of the year.
Moreover, the Bank stated that, while it expects "ample liquidity in the international financial markets" to continue, a less accommodative monetary stance in developed economies - in particular in the United States - could heighten exchange rate volatility in the short term. Taking this into account, monetary authorities highlighted that they will remain vigilant on the evolution of their 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 4.04% year-end projection.