Bank of Mexico Cut Interest Rate, Too
March 21, 2024
Mexico’s overnight interbank interest rate has been sliced to 11.0% from 11.25%. This is the first reduction since February 2021, when the rate settled in at a pandemic low of 4.0% that would last only four months. After increases totaling 150 basis points during the final seven months of 2021, 500 bps in 2022, and 75 bps in 2023, the interest rate crested at 11.25% in March 2023 and remained at that level until today’s move. This first decrease happened in spite of the backing up of CPI inflation from 4.26% last October to 4.9% in January. A released statement from the Bank of Mexico’s Governing Council notes that that blip reflected non-core items as core inflation continued to recede, plus the fact that overall CPI inflation dropped back to 4.4% last month. The expectation remains that total inflation will converge on the 3% target around a year from now, but officials concede that “the balance of risks for the trajectory of inflation
within the forecast horizon remains biased to the upside.” Future policy changes will be guided by available information at the time of each policy review. Hitting the inflation target within the forecast time horizon is paramount, and so a restrictive monetary stance needs to continue.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Mexico
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