Mexico Awaits Clear Inflation Decrease Before Lowering Rates, Says Bank Official
Mexico will maintain its benchmark interest rate unchanged until a clear downward trend in inflation is observed, says Jonathan Heath, Deputy Governor of the Bank of Mexico. Despite headline inflation rising for consecutive months, the bank is in a wait-and-watch mode and will not necessarily follow U.S. Federal Reserve actions.
Mexico's headline inflation must exhibit a definite downward trend before the country's central bank will consider lowering the benchmark interest rate, according to Bank of Mexico Deputy Governor Jonathan Heath, in an interview with Visor Financiero published Monday.
Headline inflation saw increases in March, April, and May, prompting Banxico, as the Bank of Mexico is known, to maintain the rate at 11.00% during its May and June meetings. A Reuters poll published Monday indicates inflation is expected to rise again in June for the fourth consecutive month.
Heath emphasized that rate cuts should not begin prematurely. "We should not start lowering rates prematurely until we see those two things: general inflation resumes its downward trend and the services component breaks its sideways trend," he said. On the influence of the U.S. Federal Reserve's rate decisions, Heath stated that Banxico would monitor these decisions but act independently, noting, "If the Fed now lowers (rates), we do not necessarily have to lower, or if it does not lower and we have the opportunity to lower, we are going to do so, because it no longer depends on what the Fed does."
(With inputs from agencies.)
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