© Reuters. SUBMIT PHOTO: Mexico’s Central Bank (Banco de Mexico) structure in downtown Mexico City, Mexico August 9, 2022. REUTERS/Henry Romero/File Photo
By Brendan O’Boyle
MEXICO CITY (Reuters) -Most members of the Bank of Mexico’s governing board required care as the reserve bank of Latin America’s No. 2 economy eyes possible rate cuts in the brand-new year, minutes from its last financial policy conference revealed on Thursday.
The minutes from the Dec. 14 conference revealed the five-member board concurred that Mexico’s benchmark rate of interest must be held at its existing all-time high for “a long time” in order to bring inflation to the main target.
The Bank of Mexico, called Banxico, all chose to keep its essential rate at 11.25% for a 6th straight time at the December conference in the middle of sticky inflation.
After peaking in the 3rd quarter of 2022, Mexican yearly inflation has actually fallen gradually, reaching its least expensive level considering that February 2021 in October although it ticked up in November and once again in early December.
The majority of the board concurred throughout the conference that while inflation is anticipated to reach the bank’s 3% target in the 2nd quarter of 2025, the outlook for increasing customer rates still presents obstacles.
In specific, board members indicated a more steady slowing down of food and services inflation, which affected the board’s choice to modify heading inflation projections up for some quarters.
In Thursday’s minutes, 4 members of the board stated care should be worked out when examining or interacting financial policy modifications, with the 5th revealing the view that decreasing the essential financing rate might start to be talked about at the bank’s next conferences.
One member “revealed that now more than ever a message of vigilance and care should be communicated,” mentioning Mexico’s direct exposure to external and domestic threats and requiring “versatility in future choices.”
The members’ mindful views recommend that if a rate cut can be found in the very first quarter, it is most likely to take place at the board’s March conference instead of at its upcoming conference on Feb. 8, stated Alberto Ramos, Goldman Sachs’ primary Latin America economic expert.
“The minutes are a little hawkish considering that although a number of directors prefer a data-dependent technique they do not supply any clear sign that the very first rate cut will emerge at the next conference,” Ramos stated in a note.
Compared to Latin American peers, Mexico’s reserve bank has actually hesitated to start a financial reducing cycle, even as local next-door neighbors like Brazil and Chile cut rates in the face of slowing inflation.