Banxico ‘freezes’ its interest rate today, June 27, 2024

He Bank of Mexico (Banxico) decided today, June 27, to maintain his reference interest rate at 11% with divided voting. Analysts already anticipated that the central bank would not take out the scissors until its next monetary policy meeting in August.

It was with the vote of the governor of Banxico, Victoria Rodríguez Ceja, as well as that of Galia Borja Gómez, Irene Espinosa Cantellano and Jonathan Heath that it was decided not to move the interest rate; Meanwhile, Omar Mejía Castelaz voted in favor of reducing the rate by 25 basis points to a level of 10.75%.

“The Governing Board evaluated the behavior of inflation and its determinants, as well as inflation expectations. It was of the opinion that the challenges and risks on both sides of the balance sheet merit continuing with prudent management of monetary policy,” highlighted Banxico.

Banxico highlighted that “significant volatility” has been observed in national financial markets and that interest rates on medium- and long-term government securities have increased significantly. However, they have recently performed better.

In addition, he referred to the annual general inflationwhich has shown an upward trend and in the first half of June stood at 4.78%, above the 4.59% of the second half of May. Meanwhile, the underlying index, considered a better parameter to measure the price trajectory because it eliminates highly volatile products, rose to 4.17%.

Given this, Banxico maintained its estimate for general inflation for the end of the year at 4% and raised that of the underlying inflation to 3.9%, which is why it expects that the goal for the general inflation will be reached in the fourth quarter of 2025. .

Banxico expects rate cuts in the future

The Bank of Mexico estimated that in the future the inflationary environment will allow discussion of possible cuts to the reference interest rate, for which it will take into account the perspective of global conflicts, economic activity and inflation.

“It will consider the impact of the restrictive monetary stance that has been maintained and that which continues to prevail on the evolution of inflation throughout the horizon in which monetary policy operates. The actions that are implemented will be such that the reference rate is consistent, at all times, with the trajectory required to promote the orderly and sustained convergence of general inflation to the 3% goal within the expected period,” he indicated.

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