Banxico announced on Wednesday that a “new stage” will begin to combat inflation, so it analyzes a second consecutive cut of 50 base points to its reference rate, which would take it to 9%, from the current 9.5%.
This decision responds to the significant progress in the deflationary process and the need to adapt monetary policy to new economic conditions, according to the governor of the Central Bank, Victoria Rodríguez Ceja, during the presentation of the last quarterly report of 2024.
However, it also coincided with the rest of the members of the Banxico Governing Board that, after the previous cuts of 25 base points in November and December and the adjustment of 50 points in February, Banxico “enters a new phase in the that the same degree of monetary tightening is not required ”as during the peak of global inflationary shocks.
“This is as if we had a very serious patient, with high inflation. And we had it in intensive therapy, but later this patient improves, shows an improvement. It now has inflation below 4%, but above 3%. And in that sense, we already take it out of intensive therapy, but the important thing is that we do not discharge it. We are not sending it home, but we keep it in treatment, ”exemplified the subgovernor José Gabriel Cuadra.
In this sense, subgovernor Jonathan Heath said that, even with the advances to adjust inflation to the target level of 3%, the Central Bank is not “satisfied” with its current level of almost 3.6%.
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“We are not seeing here a dilemma between supporting growth or continuing to lower inflation,” said Heath, who said that a contraction of economic activity and inflationary gap in the country generate conditions to adjust monetary policy.
He also stated that no impacts have been expressed by the new commercial policies that the United States has assumed since Donald Trump’s return to the White House since January 20, so he trusted that “there is a lot of space to continue going down the rate ”
Governor Rodríguez Ceja stressed that general and underlying inflation in Mexico closed the year at levels close to its historical average.
In January, underlying inflation was 3.66%, accumulating five consecutive months below 4%.
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“These data show that the inflationary episode derived from global shocks is being overcome,” said the governor, coinciding with the subgovernor Galia Borja, who insisted that “we do not have the same risks we had in the worst moments of inflation as We live in the year 2022.
The decision to consider a new cut is also based on the economic weakness observed since the end of 2023, while in the fourth quarter of 2024 registered a contraction of 0.55%, deepening the economic slowdown.
Banxico projections anticipate moderate growth for 2025, with a forecast adjusted to GDP, from 1.2% to 0.6%.
With EFE information
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