Banxico governor signals extended hold after surprise rate cut

Bank of Mexico governor Victoria Rodriguez Ceja has signalled an extended hold after last week’s surprise cut, telling El Financiero that keeping the policy rate at its current level of 6.25 percent for a prolonged period will support inflation converging to the 3 percent target and will be adequate for the external macroeconomic challenges Mexico faces. The November 5 cut, of 25 basis points from 6.50 percent, passed 3 to 2, with deputy governors Galia Borja and Jonathan Heath voting to hold, and Rodriguez said the board had been assessing a one-off adjustment since September.

Rodriguez said the recent rise in headline inflation, from 3.42 percent to 3.62 percent between the first half of September and the first half of October, was anticipated, came entirely from non-core prices, and was not generalised, while core inflation held stable at 3.78 percent on a declining trend. She added that activity has grown more than expected but slack remains, so she does not expect demand-side price pressure.