Expensive money in Mexico is here to stay

The underlying index will continue to worry Banxico, which “has been difficult for it to control,” Gonzali said.

Although inflation has been seen to drop in recent measurements, much of this is due to arithmetic effects; “Since they were high inflations, you have a drop in inflation due to a mere base effect,” he added.

When will the rate go down?

Now that inflation has started to subside and the end of the interest rate cycle is getting closer, it is also important to know how long it will remain at its highest point, before starting cuts.

For Actinver, central banks should not cut their reference rate in a period of less than six months from their last move so that monetary policy can act efficiently.

However, “with the inflationary conditions that exist at that time”, the Governing Board must be between nine and 12 months to start the rate cuts. “The first opportunity to see a rate cut should not be before the first quarter of next year,” said the Activer economist.

Luis Gonzali, from Franklin Templeton, estimates that the interest rate will end the year at 11.5%.

15 of the analysts in the Citibanamex survey believe that the first rate cut will be as soon as September of this year.

Inflation

Actinver recently lowered its inflation expectations, they went from 5.7% to 5% for this year.

Although Mexico and the world experienced atypical inflation situations, with inflation expectations far beyond the mandate of central banks. However, in the case of Mexico, expectations remained anchored around 3%, as a result of the central bank’s rate increases.

In addition to monetary policy, Covarrubias stressed, nearshoring has given Mexico a favorable environment, achieving an appreciation of the peso.