November 14, 2024 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.
“The Bank of Mexico acted in line with market expectations, reducing its interest rate by 25 basis points to 10.25%. This adjustment marks the bank’s fourth cut in 2024, accumulating a total reduction of 100 basis points since the start of its easing cycle. This time, the decision was unanimous, unlike the September vote when Deputy Governor Jonathan Heath advocated for holding the rate steady. This unanimity underscores the cohesion in the bank’s current approach amidst increasing global uncertainty, volatility, and currency pressures.
Banxico faces a challenging scenario in which inflation forecasts have been revised upwards in the short term, although convergence toward the 3% target by the end of 2025 is still expected. In October, general inflation stood at 4.76%, driven by supply shocks, while the core inflation rate continues to decline, reaching 3.80%. The bank also highlighted that the Mexican peso has exhibited marked volatility and depreciation, exacerbated by electoral uncertainty in the United States.
Looking ahead, Banxico has indicated that it will continue to act prudently, assessing inflation risks and economic weakness in its upcoming decisions. Pressure on the Mexican peso and uncertainties around the U.S. political outlook are key factors likely to influence Mexican monetary policy. This cautious approach reaffirms Banxico’s commitment to price stability in a challenging environment, where the restrictive stance could be extended further.
Overall, it is clear that structuring a monetary policy framework for the Mexican entity has become more complex, as Banxico aims to normalize its policy and stimulate greater economic dynamism in Mexico. At the same time, it must navigate potential complications that U.S. election results may bring for Mexican assets and the economy.”
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