The subgovernor of the Central Bank of Mexico (Banxico), Jonathan Heat, believes that the majority of the Governing Board will vote at the end of the month to lower the key rate in 50 basic points (PB) although, in their opinion, the cuts of that magnitude and evaluate the data should be paused.
And it is that inflation exceeded the official objective of 3% +/- a percentage point after the general price index accelerated its highest level from November to 4.42% since November, while the underlying inflation amounted to 4.06%, its highest level in almost a year.
“In my personal opinion, I believe that most of the members of the Board interpret this rebound in inflation as a temporary phenomenon and think that the official trajectory of the bank for inflation will materialize. Therefore, I think that most will vote to adjust the objective rate in 50 base points in June, as announced in the prospective guide of the announcement of May 15 last,” he said in written responses.
Last month, Banxico reduced his rate at a half -point, for the third time online, to take it to 8.5% and reiterated that he could make a next adjustment of that magnitude depending on inflation.
Heath also stressed that atony is expected in national economic activity and recently lowered its GDP growth prognosis to 0.1% by 2025 from a previous 0.6%.
“While I am a bit skeptical in which inflation is going to behave as the official projection anticipates, it is clear to me that my opinion belongs to the minority, so I do not see that the forecast of an adjustment in 50 base points in June will be complicated,” he said.
Read more: Banxico Subgovernor sees Prudent Pausar Key Rate Cuts
Banxico should be ‘more prudent’ in inflation data cuts: Heath
Banxico foresees that general inflation is located at 3.3% in the fourth quarter of the year and the underlying in 3.4% and that the 3% target goal is reached in the third quarter of 2026.
An analysis released on Tuesday revealed that despite the acceleration of inflation the market awaits the half -point cut for the June 26 decision.
Asked if Banxico should consider a lower magnitude movement for his June decision, the official said that in his personal opinion “it is at this time to be more cautious, more prudent, until ensuring that inflation clearly resumes a downward trajectory consistent with a convergence towards our 3%goal.”
“Therefore, I think it is time to Pausar, not to continue lowering the rate in the magnitude as we have done in the last decisions, and give us time to better evaluate the evolution of the data,” he added.
The subgovernor said that it considers that the dynamics of inflation need to be studied at the moment “to assess whether our projections will be wise.”
“The rebound in inflation emphasizes the fact that the balance of risks for inflation is still clearly biased,” he said. “In principle, the official projections of the bank suggest that this will happen from the third quarter of the year. However, for me it is not clear that this behavior will materialize,” he said.
With Reuters information
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