Mexico cenbank members propose rate cuts discussion in Q1 - minutes

The minutes showed that Banxico's board said that while there had been advances in the disinflation process and even acknowledged a "significant" decrease in inflation, the outlook remained "challenging." Annual inflation ticked up in early November to 4.32%, official data published earlier on Thursday showed, reflecting the end of some summer energy subsidies.

Multiple members of the Bank of Mexico's five-person governing board brought forward the idea of discussing cuts to the key interest rate during the first quarter of 2024, minutes of the bank's latest monetary policy meeting showed on Thursday.

The Bank of Mexico, known as Banxico, unanimously held its key rate steady at 11.25% for a fifth straight time at its meeting earlier this month, following a nearly two-year rate-hike cycle. In the "first quarter of 2024, a discussion regarding the possibility of a fine-tuning of the reference rate could begin," one member said.

Another board member argued that considering improvements in the inflationary outlook and that the "transmission channels are operating and will continue to have an incidence on inflation in the following quarters, there is room to discuss cuts to the reference rate." Some board members said the implied expectations for the path of key interest rate contained in so-called TIIE swaps, the bank's interbank equilibrium interest rate, suggested the "probability that the first interest rate cut takes place between the March and May decisions and that subsequent decreases will be gradual."

The comments follow the board's consensus to keep the key rate at its current level for "some time" in order to bring inflation down to target of the 3% target, plus or minus a percentage point. There were, however, differing opinions within the board regarding when inflation would converge to target.

"Although inflation has been decreasing, its convergence to the target in the second quarter of 2025 has become more challenging," Deputy Governor Irene Espinosa said according to the minutes. The minutes showed that Banxico's board said that while there had been advances in the disinflation process and even acknowledged a "significant" decrease in inflation, the outlook remained "challenging."

Annual inflation ticked up in early November to 4.32%, official data published earlier on Thursday showed, reflecting the end of some summer energy subsidies. Closely watched core inflation, however, eased to 5.33% from 5.50%.