Banxico puts growth first as rates held
Mexico’s central bank put growth data front and center Friday with a statement that analysts interpreted as an indication it will cut interest rates if economic data disappoints further
The bank pointed to slow global growth and a falling
peso when it kept rates at 4% at its Friday meeting.
Some analysts said there was a higher likelihood the
bank’s next move would be to cut rates than to
raise them, and that the statement showed growth was a central
factor in Banxico’s monetary policy.
Slower than expected growth in emerging markets, especially
Asia, the weak eurozone economies and downward revisions to
growth forecasts in the US contributed to negative pressure on
global GDP, the central bank said. The Mexican economy was also
slowing, and inflation had started to fall since May.
"Overall, Banxico shows its continued concern with the
outlook for growth," said RBS analysts. They said Banxico would
cut rates later in the second quarter if growth continues to
Goldman Sachs analysts said Banxico’s
forward-looking language was broadly neutral but the overall
stance was more dovish. "The central bank is clearly more
comfortable with the inflation outlook and more concerned with
the significant loss of buoyancy of domestic demand. This
implies that, although rate cuts are not currently in play, the
central bank may consider monetary easing in the near future if
the soft activity patch continues and the inflation dynamics
Meanwhile, analysts at Barclays and Itaú said they
expected Banxico to remain neutral for the rest of the
"In our view, in spite of the downside surprises in
Mexico’s economy, the prospect of the withdrawal
of monetary stimulus in the US and the already-low interest
rate in Mexico will prevent the board from engaging in
additional monetary easing," said Itaú analysts.