A Reuters survey is expected to reduce interest rates 50 BPS in the midst of an ongoing economic slowdown of the Dysflation process of Banco de Mexico (Banxico) on 27 March.
Economists expect to be low to 8.25% in 2025
23 of the 25 economists expect the Central Bank to reduce borrowing costs from 9.50% to 9.00%. The other two economists estimate that the Central Bank of Mexico will change rates.
This will be the second ratio deduction of this size, because the management council approved the main reference rate from 10.00% to 9.50% in the division of 4 to 1 vote and has voted to reduce 25 BPS rates.
Although Banxico’s task is to control inflation, the final economic slowdown, the policy makers make inflation as the economy cools down.
In addition, Mexico’s economic document is busy next week with the release of inflation, retail sales and trade balance data next week.
Banxico FAQ
Mexico Bank, also known as Banxico, is the Central Bank of the country. The mission is to maintain the value of Mexico’s currency, Mexico Peso (MXN) and to determine the monetary policy. For this purpose, the main purpose is to maintain low and stable inflation in target levels -a midpoint in a 3%tolerance band, in a tolerance band between 2%and 4%.
Banxico’s main intermediary to guide the monetary policy is to determine interest rates. When the inflation is above the target, it will try to domesticate bank rates by raising the rates, which will make households and businesses borrow money and thus cooling the economy more expensive. Higher interest rates are generally positive because they make the country a more attractive place for investors, causing higher efficiency for Mexican pesos (MXN). On the contrary, low interest rates tend to weaken MXN. The ratio difference with USD is expected to determine the interest rates compared to the US Federal Reserve (FED).
Banxico meets eight times a year and the monetary policy is greatly influenced by the decisions of the US federal reserve (FED). Therefore, the Central Bank’s decision -making committee usually meets a week after the FED. In doing so, Banxico reacts and predicts the monetary policy measures set by the federal reserve. For example, after the Covid-19 pandemi, before raising the Fed rates, Banxico first made the Mexican pesos (MXN) to reduce the chances of a significant depreciation and prevent capital outflows that could destabilize the country.
