Mexico City /
The inflation in Mexico closed the first half of September in 4.66 percent annually further highlighting the indicator slowdownso experts say that this opens the door for the Bank of Mexico (Banxico) lower even further reference interest rate.
Luis Adrián Muñiz, deputy director of economic analysis at Vector Casa de Bolsa, explained that these results of the National Consumer Price Index (NCPI) support the expectation of a cut in central bank monetary policy.
“During the first fifteen days of the ninth month, the country’s inflation stood at 0.09 percent biweekly, five percentage points below market expectations,” the expert commented.
He highlighted that this surprise of the period comes from the non-core price group, which includes goods and services whose costs do not respond directly to market conditions but are highly influenced by external conditions such as the weather or government regulations, which fell 0.31 percent biweekly compared to the decline in the value of agricultural and food sector products.
“We do not see conditions for further significant changes in the inflation of goods, considering that it is well below its long-term average, the recent depreciation of the peso, the inflation of producer prices and that the slowdown that we estimate for private consumption would be concentrated in services,” he said.
For this reason, CIBanco said in a statement that it estimates that Banxico might lean towards a 50 basis point cut in the interest rate.
“Going forward, the door would remain open to further reductions, so by the end of 2024 we estimate that the funding interest rate could be set at 9.75 percent,” he said.
However, Alejandro Javier Saldaña Brito, chief economist at Ve por más bank, warned that the underlying index continues to grow but at a slower pace since the second half of February 2021.
“The merchandise sector continues to moderate, although less and less, and there was even a small rebound in non-food items, which tend to reflect the pass-through effect of the exchange rate“, he explained in a report.
He believes that although the economy has slowed down, the reluctance to lower the cost of services is due to the more gradual transfer of the shocks suffered in past years, their greater sensitivity to increases in wages due to regulation and the lag with which some tend to update.
ER
