Banxico signals long rate pause as inflation eases
The minutes of the Bank of Mexico (Banxico) August’s August meeting revealed that the central bank is expected to hold rates steady for some time, despite the resumption of the disinflation process.
Banxico has signaled a pause in raising its long-term interest rate, amid signs of easing inflation. The bank's governing board decided to maintain the reference rate at 6.50% at their August meeting, despite the resumption of the disinflation process. Policymakers recognized the uncertain global backdrop and inflation risks, which were tilted to the upside.
External shocks, such as the Middle East conflict, could negatively impact global economic activity and pose upside risks to inflation. Most members noted that despite GDP expansion, the output gap remains in negative territory. The Bank of Mexico expects to maintain the reference rate's current level, as most members highlighted the persistence of global uncertainty and the potential inflationary risks stemming from the Middle East conflict.
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