Reuters was the first to report that Bank of Mexico board member Gerardo Esquivel advised against increasing the monetary policy rate to excessively restrictive levels due to the weak economy. He mentioned that the current rate-hiking cycle could conclude with rates between 10% to 10.25%. Esquivel did not provide a timeline for when the rate would reach its terminal level in an interview with Reuters.
Analysis:
Gerardo Esquivel’s comments on the monetary policy rate have significant implications for investors in Mexico and worldwide. If the Bank of Mexico follows his advice and keeps rates within the suggested range, it could indicate a more accommodative stance towards monetary policy. This could lead to lower borrowing costs for businesses and consumers, potentially stimulating economic growth. On the other hand, if the bank ignores Esquivel’s warnings and opts for higher rate hikes, it could signal a more hawkish approach, which may dampen economic activity. Investors should closely monitor the central bank’s decisions in the coming months to gauge the direction of Mexico’s economy and adjust their investment strategies accordingly.