Three members of Mexico’s central bank consider cutting interest rates

Three members of the Governing Board of the Bank of Mexico are consideringa djusting the reference rate downwards.

Written by: Gabriel Micillo • Thursday, February 22, 2024 • 2 min read

• Last updated: Thursday, February 22, 2024

Three members of Mexico’s central bank are considering cutting interest rates

Three members of Banxico are willing to consider cutting the interest rate at the March meeting based on its minutes.

Three members of the Governing Board of the Bank of Mexico are considering the convenience of adjusting the reference rate downwards, and one of them commented that it should be evaluated at the next meeting, scheduled for March 21st.

According to information presented in the minutes of the Bank of Mexico’s first monetary policy announcement of the year, the other two members of the Governing Board cautioned that it cannot be ruled out that it may be necessary to maintain the current level of the interest rate for longer than anticipated by the market consensus.

In fact, one of these two members opined that “before initiating a cycle of consecutive rate cuts, it is necessary for core inflation and particularly the services subcomponent to show less persistence and consolidate a downward trajectory.”

In the account of the first monetary meeting of the year, where they kept the rate unchanged at 11.25% for the ninth consecutive decision in 11 months, “some” argued that the behavior of aggregate demand could pose a risk to the persistence of inflation.

One pointed out that “the higher public spending planned for this year could reinforce demand pressures more than expected and slow down the reduction of inflation.”

That same board member noted that “by 2025, if the cut in public spending turns out to be less than announced, economic growth would be higher than projected.”

In recent years, Mexico has been greatly benefited by the nearshoring from the United States, transforming it into the financial star of Latin America.

Mexico has benefited from nearshoring due to its geographical proximity to the United States, advantageous trade agreements like USMCA, a skilled labor force in manufacturing and technology sectors, cost-effectiveness compared to developed countries, and improvements in political stability and the business environment

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Gabriel Micillo

Gabriel is a certified public accountant graduated from UNNE (National University of the Northeast, Argentina) and a software developer, currently pursuing a Master's degree in Finance and Economics. With nearly 8 years of experience working for accounting firms and brokerage firms. Concurrently, he has produced economic and financial reports on the current state of regional economies for the clients of the establishments where he has worked. Additionally, he assisted colleagues like Ignacio Teson in the drafting and editing of articles on similar topics in English language.