Financial institution of Mexico’s governor says inflation combat enters new part

By Anthony Esposito

MEXICO CITY (Reuters) – Mexico’s inflationary atmosphere is predicted to permit policymakers to maintain reducing the benchmark rate of interest, the top of the Financial institution of Mexico instructed Reuters, because the combat to deliver down inflation has entered a brand new part.

Banxico, because the Mexican central financial institution is thought, lower the important thing charge by 50 foundation factors to 9.50% on Thursday, double the 25-basis-point cuts it had made because it started decreasing borrowing prices from a file excessive of 11.25% in March 2024.

“Our work just isn’t over. The combat towards inflation is now in a brand new part,” Banxico Governor Victoria Rodriguez mentioned in an interview late on Sunday.

Final week’s charge discount introduced Mexico’s rate of interest to its lowest since September 2022 as annual inflation in Latin America’s second-biggest economic system slowed to three.69% within the first half of January.

That’s the lowest stage for headline inflation since early 2021 and is inside the financial institution’s goal of three%, plus or minus one share level.

“In an effort to face the challenges of this new part, we’d like decrease (curiosity) charges,” Rodriguez added.

Mexico’s peso forex and home shares have suffered prolonged volatility amid the specter of U.S. tariffs on its neighbor’s exports, regardless that the strictures had been paused till March 1, following a pact between the 2.

“We’re assured authorities of each international locations will work to seek out higher cooperation and lasting options, though we, in fact, stay attentive to what is perhaps mentioned in March,” mentioned Rodriguez.

Some analysts have warned the tariffs might throw Mexico into recession and set off “stagflation” – excessive inflation, stagnant progress and elevated unemployment.

Banxico might act if wanted to make sure the orderly functioning of Mexican monetary markets, Rodriguez mentioned, underscoring the significance of commerce ties for each nations.

“Commerce integration has been an essential driver of progress, as has Mexican participation in U.S. manufacturing chains, which has allowed U.S. shoppers to have entry to merchandise at aggressive costs,” mentioned Rodriguez.

(Reporting by Anthony Esposito; Enhancing by Clarence Fernandez)