The key rate reduction in March was premature, says Irene Espinosa

“I do not share the vision to foresee from now on a probable additional cut in June,” said Espinosa. “My decision for that month is still dependent on the data and without it I have no urgency to make further cuts,” she added.

Espinosa’s opinion contrasts with the perspective of the entity’s governor, Victoria Rodríguez, who recently told Reuters that the bank’s five-member governing board will discuss the possibility of resuming rate cuts in its next decision in June .

On May 9, the Bank of Mexico (Banxico) He decided maintain the interest rate reference at 11%after in Last March it carried out the first cut .

The central bank’s decision was in line with market expectations. The decision was made unanimously.

Inflation expectations in 2024

Banxico raised its inflation forecasts for the remainder of this year. The central bank expects inflation to rise to 4.6% in the second quarter from the 4.4% previously anticipated.

For the third quarter, general inflation is expected to rise to 4.4% from the 4% estimated in the previous meeting. For the last quarter of this year, inflation is estimated to be 4% from the 3.6% estimated in March.

Banxico expects that the specific goal of maintaining inflation at 3% will be achieved in the fourth quarter of 2025.

…And analysts point out that inflation will rebound to 5% in June

Analysts estimate that it will rebound up to levels of 5% in June due to persistence in the services sector.

“We still have an economy in the consumer and services part that is relatively strong, and so that may be generating certain pressures in that particular area; we also have an increase in salaries,” said Jessica Roldán, chief economist of Finamex Brokerage House.

Within the underlying component, inflation in services has remained above 5% since July 2022. This is what has prevented Banco de México from continuing to make interest rate cuts.

“Annual inflation will rebound in the coming months to a level close to 5.0% in June and then begin to decline towards a level close to 4.30% in December,” Intercam highlighted in a report.

The members of the Governing Board of the Bank of Mexico highlighted that although they expect the disinflationary process to continue, it will be the services that generate complications to bring inflation to the target.

“Services inflation is expected to show a more persistent behavior than previously anticipated,” Banxico highlighted.

With information from Reuters and Luz Elena Marcos Méndez