The Bank of Mexico (Banxico) warned this Thursday of a “more gradual than expected” reduction in inflationfor which he reiterated that he must maintain the interest rate at 11.25% for “a prolonged period,” its highest level in history.
The majority (of the Governing Board) noted that the forecasts for headline and core inflation were adjusted upward to reflect a more gradual decline than previously anticipated.. “They all mentioned that inflation is now expected to converge to the target (3%) in the second quarter of 2025,” he stated in a report.
The members of the central bank attributed the firmness of inflation “to the expectation of greater persistence in the services component, due to the accumulation of costs that have not yet been transferred to consumer prices.”
Everyone agreed that the balance of risks regarding the expected trajectory of inflation in the forecast horizon remains biased upward. Some mentioned that, in their opinion, said balance has deteriorated,” the report indicated.
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The minutes correspond to the meeting of September 28, when the Governing Board kept unchanged, for the fourth consecutive time, the interest rate at 11.25%.
The document is released after it was reported last Monday that general inflation fell to 4.45% in Septemberits lowest level since February 2021, after registering an index of 7.82% in December, its highest rate for a year-end so far this century.
But Banxico raised its forecast for general inflation, now estimating that it will average 4.7% annually in the last quarter of 2023, from a previous projection of 4.6%.
Likewise, it deteriorated its expectation for the end of 2024, when inflation would average 3.4%, above the previous forecast of 3.1%.
Although progress has been made in the disinflationary process, the outlook continues to be very complex,” said the Governing Board.
On the other hand, The central bank considered that the recovery of Mexico’s economy after the Covid-19 pandemic “has been more dynamic than had been estimated.”
The available information suggests that national economic activity continued to expand in the third quarter of 2023,” Banxico highlighted after the 3.7% year-on-year growth of the gross domestic product (GDP) in the first half of the year.
The next monetary policy decision will be on November 9.
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EFE International news agency based in Madrid and present in more than 110 countries.