This month, Banxico cut the interest rate by 25 basis points to place it at 7.25%, its lowest level since May 2022.
Core inflation, which excludes volatile food and energy prices, stood at 4.28% in October, above the bank’s target range of 3% plus or minus one percentage point.
With these data, the Governing Board aims to make a new cut in the interest rate in December, a decision that has raised concerns among analysts.
Will there be a January cost?
Regarding other risks to inflation, some members expect that after the approval of the 2026 Economic Package, increases in the IEPS on sugary drinks will have a one-time effect on food inflation, but another member asked to evaluate the indirect effects of these increases.
“It will be necessary to evaluate its indirect effects and monitor that second-order effects do not occur that encourage the underlying one to take root at levels higher than those required by timely convergence to the goal,” he noted.
Everyone considers that the balance of risks with respect to the expected trajectory of inflation in the forecast horizon maintains an upward bias.
Another member pointed out the possibility of an increase in merchandise inflation derived from the rebound in this indicator in the United States due to trade policies, while another highlighted that a new increase in the minimum wage could put pressure on prices.
Heath asks not to be complacent
In the monetary policy decision, Deputy Governor Jonathan Heath voted to keep the interest rate at 7.5% arguing that core inflation remains above 4%.
The economist highlighted that premature monetary relaxation would lead the bank to reach levels of neutrality in an environment of still high inflation with regressive effects on the general population.
“Sending a message of complacency in the face of persistent inflationary pressures could have a greater detriment to inflationary expectations,” he noted. “Finally, it must be explicitly recognized that our objective is not to maintain inflation within the range of variability but to steadily achieve the specific objective of 3%,” he considered.
