Background on Banxico and Its Governing Board
The Bank of Mexico, or Banxico, is the central banking institution responsible for formulating and executing monetary policy in Mexico. The Junta de Gobierno, its governing board, consists of five members appointed by the President for a non-renewable term of four years. These members include the Governor and four Deputy Governors.
Key Points from the Third Monetary Meeting of 2023
During the third monetary meeting held on May 15, three members of Banxico’s Junta de Gobierno signaled that significant adjustments, similar in magnitude, could still occur within the interest rate reduction cycle. The meeting resulted in a unanimous decision to apply another 50 basis points cut, lowering the benchmark interest rate to 10%.
Members’ Statements on Interest Rate Adjustments
- Two members: They warned that as the monetary stance becomes less restrictive, the weight given to the differential of interest rates compared to the United States might increase.
- One member: They emphasized that the prospective guidance should reflect caution and mention that the current pace of reductions would continue only if the inflation convergence process towards a 3% target resumes.
- Another member: They highlighted that the differential of Mexico’s monetary stance relative to the United States would eventually imply more gradual policy decisions in the future.
Economic Outlook and Concerns
According to the meeting’s minutes, some members suggested that there might be more economic slack. Meanwhile, only one member pointed out the possibility of a slight recession due to the current economic stagnation period.
Key Questions and Answers
- Q: Who is Banxico and what is its role? A: The Bank of Mexico (Banxico) is the country’s central bank, responsible for formulating and implementing monetary policy.
- Q: What did the three board members signal about interest rate cuts? A: They indicated that further significant adjustments could still occur within the interest rate reduction cycle.
- Q: What concerns were raised during the meeting regarding Mexico’s economy? A: Members expressed concerns about potential economic slack and the possibility of a slight recession due to current stagnation.
