Mexico’s central bank could “adjust” its interest rates by February or March 2024 if inflation continues to drop, board member Jonathan Heath said on Monday, December 4th, adding that a decline in core prices is especially key to hitting inflation targets.
In an interview with local station Imagen Radio, Heath said the central bank intends to maintain a tight monetary policy stance for a long time and that any early rate cuts should be seen as “slight adjustments,” not the start of a lowering cycle.
One or two rate cuts may come, Heath added, but “very gradually” and “with great caution.”
The central bank has kept rates at a historic high of 11.25% since March.
Twelve-month headline inflation in Latin America’s second-largest economy landed at 4.26% in October, still above the central bank’s target of 3%, plus or minus one percentage point.
Heath said a “large” set of risks jeopardized efforts to tame inflation, and if they materialized, it would be difficult for inflation to shrink to the target by end-2024 or early 2025.
Highlighting inflationary pressures from excess aggregate demand, Heath added that the minimum wage, which has seen historic hikes and is slated for another at the beginning of next year, could be another inflationary risk.
Mexico’s economy could “easily” close the year with growth of 3.4% or 3.5%, Heath added.
Source: OEM
