Banco de Mexico (Banxico) Expected to Cut Interest Rates by 50 bps
A recent Reuters poll has revealed that on March 27, Banco de Mexico (Banxico) is anticipated to decrease interest rates by 50 basis points (bps) due to the ongoing economic slowdown and the evolution of the disinflation process.
Insights from Economists
Out of 25 economists surveyed, 23 are in agreement that the central bank will lower borrowing costs by 50 bps, bringing the rate down from 9.50% to 9.00%. On the other hand, the remaining two economists predict that Banxico will maintain the rates at their current level.
This potential rate cut would mark the second reduction of the same magnitude, following the decision made at February’s meeting where the Governing Council voted 4 to 1 to lower the main reference rate from 10.00% to 9.50%. Deputy Governor Jonathan Heath dissented from the majority opinion and voted for a more conservative reduction of 25 bps.
Banxico’s Policy Amid Economic Slowdown
While Banxico’s primary mandate is to control inflation, the recent economic deceleration has prompted the institution to ease its policy stance. Policymakers argue that as the economy cools down, inflationary pressures also diminish.
Furthermore, Mexico’s economic calendar for the upcoming week is packed with key data releases including mid-month inflation figures, Retail Sales data, and Trade Balance reports.
Understanding Banxico: FAQs
Banxico FAQs
The Bank of Mexico, known as Banxico, is the central bank of Mexico. Its core mission is to maintain the value of the Mexican Peso (MXN) and set monetary policy to ensure stable inflation within target levels, typically around 3%.
Banxico’s primary tool for guiding monetary policy is adjusting interest rates. When inflation exceeds the target, the bank raises rates to curb inflationary pressures. Higher interest rates generally strengthen the Mexican Peso (MXN) by attracting foreign investment.
Banxico convenes eight times a year and closely monitors decisions made by the US Federal Reserve. The central bank’s policy often mirrors or anticipates actions taken by the Fed to maintain economic stability and currency value.