Mexico Central Bank Adopts Cautious Approach Amid Inflation Concerns

The Bank of Mexico's governing board is leaning towards a more cautious stance in interest rate cuts, as highlighted in the recently released minutes of the June meeting. Multiple members expressed support for smaller cuts in response to persistent inflationary pressures and lackluster economic growth.

June saw a unanimous decision among four board members for a 50-basis-point cut, marking the fourth consecutive rate reduction of this size. Inflation figures remained above the central bank's objectives, with headline inflation slightly easing in June to 4.32%. Core inflation, however, continues to rise, hitting 4.24% – the highest since April 2024.

Alberto Ramos from Goldman Sachs noted the prevailing cautious sentiment within the board, with expectations for future rate cuts not surpassing 25 basis points. Meanwhile, Deputy Governor Jonathan Heath emphasized caution, arguing the weak economy does not assure a significant drop in inflation, underscoring the need for a prudent approach.

(With inputs from agencies.)