The Bank of Mexico decided this Thursday to keep the interest rate unchanged at 6.5%. The Governing Board unanimously chose not to alter its main tool to stabilize inflation. “The Governing Board evaluated the inflationary outlook. It considered the observed levels of the exchange rate, the absence of demand pressures in the economy, and the degree of monetary restriction implemented,” the central bank justified in a statement.
Inflation in the first half of July stood at 3.10%, its lowest level since 2020, according to data from the National Institute of Statistics and Geography (Inegi). The indicator has declined over the last four months, approaching the central bank’s target of 3%. “Regarding inflation forecasts, it is still anticipated that both headline and core inflation will decline over the forecast horizon, albeit more gradually than previously expected,” adds the Governing Board.
The reference rate has been at this level since May, following a cycle of cuts that began in April 2024 and was halted by the central bank this year. The pause coincided with the development of the conflict between Iran and the United States in the Middle East; however, its effects—such as the rise in hydrocarbon prices—have not significantly pressured inflation. “The Governing Board judges that the monetary stance is appropriate to face the challenges of the macroeconomic environment, including those derived from the international context,” the central bank indicates.
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This Thursday’s monetary policy decision aligns with market estimates, which only foresee that the Bank of Mexico will continue on the same path or have a slight margin of 25 basis points to modify the rate for the rest of the year, according to Citi’s expectations survey. “In our base scenario, the rate would remain at that level for the rest of the year,” point out Banamex. “We still think Banxico will keep the rate at 6.50% for the rest of the year and, depending on how inflation behaves, we might start to see some change towards 2027. But, for now, it is still very early to have greater certainty about that scenario,” estimates Luis Gonzali, co-director of investments at Franklin Templeton.
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