Mexican Central Bank's Cautionary Stand on Premature Rate Cut Amid Rising Inflation

Mexican central bank deputy governor Jonathan Heath has expressed concerns over a recent interest rate cut by the Bank of Mexico. Heath believes the decision was premature, citing a rise in headline inflation that could affect other prices. The rate cut, reducing from 11% to 10.75%, was also opposed by deputy governor Irene Espinosa.

Mexican central bank deputy governor Jonathan Heath warned in an interview published on Wednesday that a recent rise in headline inflation could hit other prices, while cautioning that he viewed the monetary authority's recent rate cut as premature.

Heath, in an interview with local outlet El Universal, said he thought "it is premature to lower (the rate) now. When I see visible results, then we can lower it." Last week, the Bank of Mexico cut its interest rate to 10.75%, from 11%, with Heath and deputy governor Irene Espinosa voting to hold the rate.

Consumer price data for July showed that annual headline inflation rose to 5.57%, surpassing June's rate of 4.98%, as a result of a significant increase in the non-core component.

Banxico head Victoria Rodriguez told Reuters on Sunday that she believed the jump to be fleeting. But Heath said that the jump could have a "contagion effect" on other prices, which happened in 2017 with gas prices.

(With inputs from agencies.)