Background on Banco de México (Banxico) and its Governor, Victoria Rodríguez Ceja
Banxico, Mexico’s central bank, aims to maintain price stability within a target range of 3% ±1 percentage point. The current governor, Victoria Rodríguez Ceja, has led Banxico to implement consecutive interest rate cuts. This proactive approach reflects the bank’s commitment to supporting economic growth amid global uncertainty and expected deceleration.
Interest Rate Adjustments
In its latest meeting, Banxico reduced the benchmark interest rate by 50 basis points, marking the second consecutive cut of this magnitude. The central bank signaled its readiness to continue lowering rates if inflation remains within the target range, signaling confidence in the economy’s resilience.
Currently, the interest rate stands at 9%, a level considered supportive for economic growth despite global uncertainties. Market expectations lean towards further rate reductions from Banxico, given the ongoing inflationary pressures and global economic slowdown.
Inflation Breakdown by Categories
According to the Inegi’s report, Mexico’s consumer inflation rose 3.96% annually in the first half of April, with two consecutive quinquennial accelerations. However, this period’s advance was modest compared to the 3.93% annual inflation reported in the latter half of March.
- Core Inflation: The subyacente category, which excludes more volatile items, showed annual inflation of 3.90% during the first 15 days of April. Within this category, goods inflation was 3.28% annually, while services prices increased by 4.60%.
- Non-Core Inflation: The non-subyacente category, which includes more volatile items like fresh produce, reported annual inflation of 4.41%. Within this category, the price of fruits and vegetables decreased by 2.74% annually, while poultry products saw an 8.92% increase.
- Energy and Regulated Tariffs: The energy and tariff category showed annual inflation of 3.09%.
Market Reaction and Future Expectations
The slight rise in inflation during the first half of April surprised the market, which had anticipated a decline to 3.89% annually. Nonetheless, Banxico’s inflation remains within its target range, reporting its eighth consecutive quinquennial period within this interval.
Despite the recent inflationary pressures, Banxico’s proactive interest rate adjustments and commitment to maintaining price stability have instilled confidence in the market. As global uncertainties persist, further rate cuts from Banxico remain a possibility, should inflation continue to stay within the target range.
