Bank of Mexico Weighs Interest Rate Strategy Amid Inflation Shifts

The Bank of Mexico considers cautious interest rate cuts amid easing inflation and external uncertainties, as shown in their latest monetary policy meeting minutes. Despite inflation easing, the bank remains cautious due to financial market volatility and global economic changes affecting their decision-making process.

The Bank of Mexico's governing board is contemplating interest rate reductions as inflation eases, the minutes from their recent monetary policy meeting reveal. Despite a unanimous decision to lower the benchmark interest rate by 25 basis points to 10.25%, caution prevails over hasty moves.

Annual headline inflation decreased more than anticipated as of mid-November, dropping to 4.56%. This unexpected easing fuels speculation of further rate cuts, potentially during Banxico's upcoming meeting on December 19. However, board members urge careful consideration, mentioning the impact of external factors like President-elect Donald Trump's U.S. election victory, which has added to global market volatility.

One board member highlighted that the election and other events have affected economic indicators and price dynamics, demanding greater prudence in monetary policy. As Banxico's easing cycle continues with four rate cuts this year, the board remains more conservative than some regional counterparts, citing Brazil's experience with reversing rate cuts amid rising inflation.

(With inputs from agencies.)