Banxico expected to stay put as inflation risks block easing – Reuters

A Reuters poll indicates that Mexico's Central Bank, Banxico, will keep interest rates unchanged at 6.50% in their upcoming meeting on Thursday. Economists project that inflation risks are increasing, while growth risks are decreasing. This stance is expected to maintain a neutral tone from the central bank. The bank's main goal is to keep Mexico's inflation within a target range of 2-4%, primarily through adjusting interest rates.

When inflation exceeds the target, Banxico increases rates, making borrowing more expensive and cooling the economy. In this case, the forecast shows that Mexico's key interest rate should remain static until mid-2028. Eight out of 13 respondents anticipate further rate cuts, while five believe rates will stay the same. Banxico, Mexico's central bank, aims to maintain the value of the Mexican Peso and set monetary policy to keep inflation low and stable.

They primarily influence policy by setting interest rates. When inflation is above the target, they raise rates to cool the economy, while lower rates weaken the Mexican Peso. The rate differential with the US Federal Reserve is a crucial factor for Banxico's monetary policy decisions. The bank meets eight times a year, with its decisions often influenced by the Fed.

After the pandemic, Banxico raised rates before the Fed, trying to prevent a significant peso depreciation and capital outflows. Markets analysts with experience in various financial instruments note that the US Dollar's bullish trend, driven by the Fed's hawkish outlook and Middle East tensions, supports the pair. Meanwhile, gold prices are holding steady near $4,400 per troy ounce, despite the US Dollar's strength and mixed US Treasury yields.