The Bank of Mexico (Banxico) states that the country has entered a stage of “disinflation”although it recognizes that an “uncertain and complex” panorama persists, as revealed on Thursday by a report from its Governing Board.
The central bank “considered that a phase of disinflation has been entered as various pressures have eased. However, he judged that these continue to affect inflation, which remains high, and that the inflationary outlook continues to be very complex.”
Despite acknowledging the decline in inflation, the members of the autonomous body agreed that “the balance of risks with respect to the path expected for inflation in the forecast horizon remains biased upwards“.
The minutes correspond to the meeting of May 18, when the Governing Board kept the interest rate unchanged at a record 11.25%, with which it broke with 15 consecutive increases in the face of general inflation, which fell in April to 6.25%, its lowest level since October 2021.
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The members anticipated the end of the upward cycle of interest rates, but qualified “that it will be necessary to maintain the reference rate at its current level for an extended period“.
“It is prudent to communicate that a restrictive monetary stance will be maintained for as long as necessary to guarantee the convergence of inflation to the target“warned one of the unidentified members.
in session, Banxico now forecast headline inflation to average 4.7% per year in the last quarter of 2023 after the previous expectation of 4.8 percent. While for the end of 2024 it maintained the expectation at 3.1%, close to its goal of a rate of 3 percent.
Despite the decrease, the Governing Board “estimates that the inflation outlook will be challenging and uncertain throughout the forecast horizonwith upside risks.
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