In early February, Mexico’s inflation fell more than predicted, setting the stage for a potential interest rate cut by the Bank of Mexico (Banxico) in March.
The National Consumer Price Index (INPC) dropped by 0.10% in the first half of February 2024 compared to the prior period, leading to a 4.45% annual inflation rate, as Inegi reported.
This marked a shift from the 0.30% bi-weekly and 7.76% annual rates seen in the same period of 2023, signaling a move back to slowing inflation after January’s consumer price increase.
This decrease in inflation, much lower than the 4.73% forecasted by analysts in the Citibanamex Survey, suggests market consensus on Banxico reducing the interest rate by 25 basis points to 11% in March.
The core inflation index rose by 0.24% bi-weekly and 4.63% annually, while non-core inflation saw a 1.10% bi-weekly drop but a 3.93% annual increase.
This scenario underscores the complexity of managing inflation and interest rates, reflecting on economic stability and policy-making in Mexico.
Background
Mexico’s recent inflation decline and potential Banxico rate cut signal strategic economic stabilization efforts.
Addressing historical inflation challenges, this move aims to boost growth amid global uncertainties by easing borrowing costs.
It reflects Mexico’s balancing act between controlling inflation and fostering expansion, showcasing resilience amidst global trade tensions and internal pressures.
This anticipated rate cut highlights Mexico’s proactive monetary policy adjustments for sustainable growth, emphasizing Banxico’s crucial role in promoting a thriving economy.