Mexico | Banxico delivers a hawkish hold even as core inflation has eased meaningfully

The central bank closed the door for the start of an easing cycle in the short term, as it continued to convey its intention to keep the policy rate unchanged “at its current level for an extended period.”

Key points

• Key points:
• As widely expected, in a unanimous decision, Banxico kept the policy rate unchanged at 11.25% for the fourth meeting in a row.
• It continued to signal a long-lasting pause likely mainly influenced by the Fed’s strong intention to hold their policy rate at a restrictive level for longer.
• Banxico’s upward inflation forecasts revisions appear to come from “an environment where economic activity is more resilient than previously anticipated.”
• Today’s decision does not change our long-held opinion that the real ex-ante rate is set to remain very high in the coming months as inflation continues to ease.
• Banxico will eventually begin an easing cycle next year to avoid an additional and unnecessary tightening of the monetary policy stance.

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