(Bloomberg) -- Go inside the global economy with Stephanie Flanders in her new podcast, Stephanomics. Subscribe via Pocket Cast or iTunes.
Mexico’s central bank is torn between loosening monetary policy despite persisting inflation risks and keeping a restrictive policy while the economy slows.
Most Banxico board members warned against lowering interest rates amid rising inflation risks and a more uncertain outlook, according to minutes from the May 16 meeting published on Thursday. At the same time, some said they should monitor the economy to make sure that tight monetary policy doesn’t continue for too long.
While the board voted unanimously to keep the rate unchanged at a decade high 8.25%, deputy governor Gerardo Esquivel dissented from the statement for the second time in as many meetings, saying it should have been more neutral rather than restrictive. He argued that inflation has been in line or better than expected since late-2018 and said that the bank’s own communication may be increasing inflation expectations.
The central bank on Wednesday cut its growth forecast for this year, opening the door to the possibility that Latin America’s second-largest economy will expand less than 1% amid weak industrial production. Policy makers also raised their inflation estimate for the fourth quarter to an annual rate of 3.7%, citing higher prices of energy and some services. It was 4.43% in the first half of May, and the board targets 3%, plus or minus one percentage point.
©2019 Bloomberg L.P.
RECOMMENDED FOR YOU
POPULAR