Background on Victoria Rodríguez Ceja
Victoria Rodríguez Ceja is the Governor of Banco de México, the central bank of Mexico. As a key figure in shaping monetary policy for the country, her decisions significantly impact Mexico’s economic stability and inflation rates.
Inflation Reduction and Interest Rate Cuts
Despite a recent surge in inflation over the past three months, which pushed it outside the permissible range in early May, Governor Victoria Rodríguez Ceja asserted that the bank will continue reducing interest rates at a similar pace as applied this year.
“As mentioned in the 2025 Monetary Program, the recent inflation episode triggered by global shocks has been left behind. Therefore, we continue calibrating monetary policy to be consistent with the current challenges in combating inflation,” she stated.
During an online press conference to present the January-March Quarterly Report, she emphasized that “moving forward, we could continue adjusting the reference rate in a similar manner.”
Since peaking at 8.7% in September 2022, inflation has significantly decreased to 3.93% in April and even 4.22% during the first half of May, she highlighted.
Future Inflation and Economic Factors
Looking ahead, Rodríguez Ceja noted that “inflation behavior should be complemented by the cyclical position our economy is in, its recent weakness, and the anticipated sluggishness for the rest of the year.”
She also mentioned that “the exchange rate has remained resilient amidst the current uncertain trade tension environment, and there has even been an appreciation within its margin.”
She further explained that “in each monetary decision, we have carefully assessed whether smaller reference rates are consistent with the inflation trajectory towards our target.”
Restrictive Real Interest Rate
The central banker explained that the real ex ante interest rate stands at 4.79%. Although this level is less restrictive than the 6.14% observed in December, it remains above the upper limit of neutrality.
Neutrality is estimated between 1.8% and 3.6%, a range that should ideally keep the economy balanced, with zero breaches in both inflation and output gaps.
“We anticipate that the inflationary environment will allow us to continue the rate-cut cycle, taking into account both economic weakness effects and policy restrictive impacts,” she added.
Addressing Concerns on Tightening
During the same press conference, Deputy Governor Gabriel Cuadra dismissed concerns about a delay in estimating the neutral interest rate.
Private research centers have warned that misjudging the neutral rate concerning economic activity normalization might lead to underestimating the required tightening for inflationary pressures. “Rest assured, everything is under control,” Cuadra reassured.
Rodríguez Ceja acknowledged the gradual rise in inflation, primarily due to increased non-underlying inflation volatility stemming from agricultural product price hikes.
Key Risks to Inflation
- National currency depreciation
- Escalating geopolitical conflicts
- Persistent underlying inflation
- Increasing cost pressures
- Climate-related impacts
