The Mexican Peso finds support and recovers after the release of the minutes of the Banxico March meeting.
Although the majority of members voted to cut interest rates by 0.25% to 11.00%, one policymaker, Irene Espinosa, voted against the cut.
Key takeaways:
- In summary, the minutes highlighted how inflation, particularly in the services sector, remained stubbornly high and interest rates would therefore need to remain elevated to bring it back down to the bank’s 3.0% target.
- Members considered that the balance of risks for the trajectory of inflation within the forecast horizon remains biased to the upside.
- It was acknowledged that although inflation remained sticky the current environment was less adverse than that faced in 2022 and the first months of 2023.
- Members observed that long-term inflation expectations drawn from the survey conducted by Banco de México remain anchored at 3.5% – above Banxico's 3.0% target.
- It was agreed that monetary policy should remain restrictive and therefore conducive to the convergence of inflation to the 3% target in the forecast horizon.
- Future decisions will be data-dependent.
- One member noted that “despite monetary restriction, domestic economic activity continues showing resilience and that demand related pressures may slow down or even reverse the fall in inflation.
- Further, it was noted that “economic activity continues exhibiting dynamism despite the historical increase in the real interest rate.”
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