Mexico central bank leaves benchmark interest rate unchanged at 11.25%

Mexico central bank interest rate decision for May 2023

Mexican central bank keeps rates unchanged at 11.25%, as expected
Mexican Central Bank (MCB) points out downside risks, including a larger-than-anticipated slowdown of the global economy, less impact from cost-related pressures, and improvements in production and distribution chains.
The balance of risks for inflation within the forecast horizon is biased to the upside according to the MCB.
MCB projections face risks such as persistence of core inflation at high levels, foreign exchange depreciation due to international financial market volatility, and greater cost-related pressures.
These pressures continue to affect inflation, which remains high and presents a complex outlook.
MCB states that the economy has begun a disinflationary process as many pressures have eased.
Inflation is projected to converge to the 3% target in the fourth quarter of 2024.
MCB will closely monitor inflationary pressures and all factors influencing the path and expectations of inflation.
Expectations for 2023 inflation have decreased, while longer-term expectations remain relatively stable at levels above target.
MCB reiterates its commitment to low and stable inflation and the need for continued efforts to consolidate such an environment.
Both headline and core inflation remain at high levels, and an orderly and sustained convergence of headline inflation to the 3% target will require maintaining the reference rate at its current level for an extended period.
MCB predicts a complicated and uncertain inflationary outlook throughout the entire forecast horizon, with upward risks.
The labor market remains strong and economic activity has been resilient in a complex external environment.
With the decision to keep the interest rate unchanged at 11.25%, the monetary policy remains in the trajectory required for inflation to converge to its 3% target within the forecast horizon.
The MCB board unanimously decided on the rate decision.
Forecast fourth-quarter average annual headline inflation of 4.7% and core inflation at 5.0%

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