Bank of Mexico poised for 50 basis points rate cut despite inflation rebound

Written by No Torres

Mexico City (Reuters) -It is expected that the Central Bank of Mexico will reduce the main interest rate at half a percentage of this month despite the increase in inflation in recent times, although analysts believe that the pace of price cuts may slow down if the prices remain under control.

In May, inflation exceeded the central bank’s goal of 3 %, in addition to or minus a percentage point, after the address rate accelerated to 4.42 %, its highest level since November. Meanwhile, basic inflation rose to 4.06 %, which is almost a year.

However, ten economic experts included in Reuters are still expected to be implemented by the fourth consecutive rate of the rate of 50 basis points in its next meeting on June 26.

“I see that they are unlikely to change their plans to reduce 50 basis points, unless there is a big surprise,” said Giulio Ruiz, the chief economist in Mexico in City.

“I think they still think that the level of cash restriction is very high compared to the current inflation rate.”

Gabriella Siller, head of the analysis at the Banco base, also expects to reduce half a percent at the end of this month, but he believes that the “recommended” work path will be the central bank to stop the cash mitigation cycle, which started in early 2024 after the rates reached a standard level of 11.25 %.

She said: “Given the increase in inflation and its potential impact on long -term expectations, it will be better for Mexico Bank either reduce rates by only 25 basis points or stop the price cutting cycle.”

Reducing 50 other basis points from interest rates to 8 %, which is its lowest level in three years, providing a boost to the faltering economy.

However, to move forward, experts believe that the rise in inflation should lead the central bank to be more cautious in its future movements.

“What we should expect, at least, is moderate in the bank’s statement,” said Rams Guterres, co -director of investments at Franklin Timbalton. “It will be reasonable to expect the Bank of Mexico to be more careful in the discounts in future prices.”

Although the bank’s board of directors has stated that it will maintain a restricted financial position, he also said that he is planning to continue to reduce prices, with a half -degree possible reduction on the table in June, depending on consumer price behavior.

Last month, the governor of the central bank, Victoria Rodriguez, said in an interview that the effects of economic weakness will be taken into consideration when calibrating monetary policy.

Mexico’s economy, the second largest in Latin America, has narrowly avoiding a technical stagnation in the first quarter, but it still faces great risks due to poor home activity and the uncertainty surrounding American trade policies.