Banxico minutes highlight concern over persistent services price growth

Mexico's central bank, Banxico, held its benchmark interest rate at 6.50% in June, citing concerns over persistent price growth in the service sector, mainly driven by World Cup demand.

Persistent price growth in Mexico's service ​sector, which saw a bump due ​to the World Cup, ‌is cause for ​concern, most members of Mexico's central bank board said their June monetary policy decision, minutes from the meeting showed on ‌Thursday.

The central bank, known as Banxico, voted unanimously on June 25 to hold its benchmark interest rate at 6.50%, beginning an anticipated pause after a final 25-basis-point cut in May. The ‌decision marked a return to consensus after an unusual 3-2 split in May. The minutes ‌from the rate decision showed a consensus among most members that long-term inflation will be relatively stable. While most members attributed the rise in services inflation in the first half of June to the tourism ⁠sector due ​to World Cup demand, ⁠some flagged worry that the creeping prices could be difficult to rein in.

"Most members highlighted the persistence ⁠of services inflation. Some members expressed that it shows no signs of returning to its historical average," ​the minutes said. Most members also agreed that progress in negotiations between the U.S. and ⁠Iran have lightly eased inflation risks stemming from the war in the Middle East, the minutes showed.

Banxico ⁠reiterated ​its previous expectation for inflation to converge to its 3% target in the second quarter of 2027, and added that the economy was expected to have expanded during ⁠the second quarter. It also underscored that the board sees it as appropriate to maintain the reference ⁠rate at its ⁠current level, also in line with earlier statements. Analysts expect a prolonged pause through the rest of the year.

Banxico's next monetary policy ‌decision is ‌scheduled for August 6.