The Bank of Mexico’s monetary policy will remain restrictive for some time, given that inflation continues to run above its target, but the bank is likely to make a slight downward adjustment in August to the cost of borrowing, a BlackRock executive said on Thursday.
Banxico, as the Mexican central bank is known, kept its benchmark interest rate at 11% in a split decision on June 27 and has remained optimistic that the inflation environment will allow it to address a rate cut at its next meetings, according to its minutes published earlier in the day.
“We do not believe that there will be a cycle of rate cuts soon at the Bank of Mexico, however, we do believe there will be adjustments in August,” José Luis Ortega, investment director at BlackRock Mexico, told reporters.
“The caution and prudence of the Bank of Mexico has prevailed, in which they have preferred to wait for the post-election noise to subside.”
Banxico’s minutes from its June meeting indicated that a majority of Governing Board members continue to expect headline inflation to converge to the agency’s permanent target of 3% in the fourth quarter of 2025.
BlackRock’s outlook – the world’s largest asset manager – largely coincides with market expectations regarding the path for interest rates in Mexico, which point to two rate cuts of 25 basis points each in the remainder of the year.
Mexico’s headline inflation accelerated in June above expectations, although a continued moderation of the key underlying index – which fell to 4.13% – could open the door to discussions to lower rates as early as next month, analysts said.
Source: expansion
