Banxico, as the Mexican central bank is known, cut its benchmark interest rate by 25 basis points, up to 10.75% in a split decision by its board announced on August 8, even though it also signaled that it expected prices to rise more than previously anticipated.
According to the minutes, the board acknowledged that while the inflation outlook continues to call for a restrictive stance of monetary policy, its evolution implies that it is appropriate to reduce the level of monetary restriction.
Deputy Governors Jonathan Heath and Irene Espinosa, however, voted to keep the rate stable at 11.00%, while Governor Victoria Rodriguez and Deputy Governors Galia Borja and Omar Mejia voted to cut the rate by a quarter of a percentage point.
“Given the circumstances and risks described, a cut in the reference rate would undermine the credibility of this Central Institute in its commitment to the constitutional mandate of maintaining price stability,” Espinosa wrote in his dissenting opinion, published in the minutes.
Consumer prices fell 0.03% in the first half of August, according to data released Thursday by the Mexican Institute of Statistics, compared with expectations of a 0.12% increase predicted by economists.
This brought the annual headline inflation rate to 5.16%, still above the central bank’s target range (2%-4%).
