Mexico’s central bank facing uncertainty before next meet

Bloomberg

Mexico’s central bank upcoming monetary policy decisions will be data driven and depend on any additional price shocks, Governor Alejandro Diaz de Leon said, signalling that policy makers aren’t committed to an established path for interest rates.
“We’re not pointing in any direction nor ruling out any direction,” Diaz de Leon said in a telephone interview. “We’re signalling that everything will be a function of how information is identified as well as additional shocks that we could identify.”
Banxico, as the central bank is known, raised the key rate by a quarter point to 5%, choosing to keep the same pace of monetary policy adjustments as at its prior three decisions, despite inflation rising to more than twice the bank’s target, to 6.2%.
In contrast, other Latin American countries including Chile, Colombia and Brazil, have opted to accelerate pace of their rate increases as global supply shocks and domestic factors have caused an inflation surge.
Diaz de Leon said the fact that Mexico’s borrowing costs are higher than those of most countries in region apart from Brazil shows the importance of considering not only how quickly the central bank has raised them, but also how countries’ overall rates compare. Mexico didn’t cut as much as other countries during the pandemic, allowing for a more gradual pace of
adjustment now, he added.
The next rate decision, which will be Diaz de Leon’s last before he steps down at the end of the year, is scheduled for December 16. Diaz de Leon said in the interview that he expects the bank will stick to its current goals after his departure.
Banxico is likely to revise its economic growth estimates in its upcoming quarterly inflation report on December 1 to take into account effect of the unexpected third-quarter contraction.
, Diaz de Leon said. Its current estimate, released in August, is for a 6.2% increase in gross domestic product this year and 3% for 2022.