Mexico – Monetary Easing Cycle Over

A member of Mexico’s central bank, known locally as Banxico (Bank of Meixco) board said there’s no room for further interest rate cuts, and the bank may eventually need to start withdrawing stimulus if inflation pressures remain elevated.

The bank’s five-member board last week voted unanimously to hold its key interest rate at a 5-year low of 4%, after its CPI inflation accelerated to 6.08%, more than double the 3% target, highest since December 2017.

Economists surveyed by Citi expect Mexico to raise interest rates in February next year. On the other hand, J.P. Morgan said it expected two 25 basis points rate hikes in the fourth quarter to 4.5%.

Reference:

1. Bloomberg, 2021-05-19, “Central Banker Sees Mexico’s Monetary Easing Cycle as Over”
2. Reuters, 2021-05-14, “Mexico’s Central Bank Holds Rates, Some See Hikes Coming”