Banxico Keeps Rate at 11.25% Again

Banxico unanimously maintained its interest rate at 11.25% for the fourth consecutive time, aligning with expert predictions.

In March, the rate was raised to this level. Later, May, June, and August meetings also saw no change. September’s decision follows this trend.

The current rate is the highest since January 2008. At that time, Banxico started its policy for the 24-hour interbank rate.

Meanwhile, Mexico’s inflation is slowing down. It’s at 4.44% annually for the first half of September. This rate is the lowest since March 2021.

Recently, the U.S. Federal Reserve also paused rate changes. It kept its rate between 5.25% and 5.50%.

Amid these actions, the Mexican peso gained 0.32%, trading at $17.6142 per dollar.

The Governing Board left the market outlook unchanged. Governor Victoria Rodriguez Ceja said the rate will stay put for a while.

Analysts see this as a restrictive move by the central bank.

“Inflation should stay at the current rate for a long time,” Banxico stated. The Governor clarified there are no plans to cut the rate.

Carlos Morales from Fitch Ratings agrees with the decision. He noted that inflation has been decreasing, now at 4.44%.

However, core inflation still sits at a high 5.78%. Morales expects Banxico will keep the rate until early 2024. Then, cautious rate cuts may start.

Background Banxico Interest Rates

This decision by Banxico aligns with the global trend of cautious monetary policy. Central banks worldwide are hesitant to make big moves.

Especially as the economic landscape remains uncertain. In Mexico, a high interest rate can attract foreign capital.

Yet, it can also stifle domestic investment and spending.

Banxico’s strategy seems to prioritize inflation control over growth. Given the declining inflation rate, this approach may be working.

Experts predict a steady rate until 2024, suggesting confidence in the current policy.