By Anthony Esposito
MEXICO CITY (Reuters) – Mexico’s inflationary surroundings is predicted to permit policymakers to maintain reducing the benchmark rate of interest, the top of the Financial institution of Mexico informed Reuters, because the battle to convey down inflation has entered a brand new part.
Banxico, because the Mexican central financial institution is thought, lower the important thing fee by 50 foundation factors to 9.50% on Thursday, double the 25-basis-point cuts it had made because it started reducing borrowing prices from a report excessive of 11.25% in March 2024.
“Our work isn’t over. The battle in opposition to inflation is now in a brand new part,” Banxico Governor Victoria Rodriguez mentioned in an interview late on Sunday.
Final week’s fee discount introduced Mexico’s rate of interest to its lowest since September 2022 as annual inflation in Latin America’s second-biggest economic system slowed to three.69% within the first half of January.
That’s the lowest degree for headline inflation since early 2021 and is throughout the financial institution’s goal of three%, plus or minus one share level.
“With a view to face the challenges of this new part, we want decrease (curiosity) charges,” Rodriguez added.
Mexico’s peso foreign money and home shares have suffered prolonged volatility amid the specter of U.S. tariffs on its neighbor’s exports, though the strictures had been paused till March 1, following a pact between the 2.
“We’re assured authorities of each nations will work to seek out better cooperation and lasting options, though we, after all, stay attentive to what is perhaps mentioned in March,” mentioned Rodriguez.
Some analysts have warned the tariffs might throw Mexico into recession and set off “stagflation” – excessive inflation, stagnant progress and elevated unemployment.
Banxico might act if wanted to make sure the orderly functioning of Mexican monetary markets, Rodriguez mentioned, underscoring the significance of commerce ties for each nations.
“Commerce integration has been an essential driver of progress, as has Mexican participation in U.S. manufacturing chains, which has allowed U.S. customers to have entry to merchandise at aggressive costs,” mentioned Rodriguez.
(Reporting by Anthony Esposito; Modifying by Clarence Fernandez)
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