Banxico minutes recognize weakness in economic activity and an increase in inflation

• Most members highlighted the weak performance of Mexican industrial activity at the beginning of the second quarter.
• All members indicated that the downward trend of gross fixed investment in Mexico persisted.
• The increase in general inflation reflected increases of both the underlying and non -underlying component.

Jonathan Heath alerts a detriment in Banxico’s credibility in the face of a complacing type cut

Most members indicated that before the environment of commercial tensions A world economic slowdown is anticipated for this year and next 2024, in particular in the United States.

It is still waiting for the Federal Reserve to carry out two reductions of 25 base points of the federal funds rate in the remainder of 2025.

All members indicated that the US dollar presented a generalized depreciation compared to other currencies in the context of commercial uncertainty.

Most observed that Mexican industrial activity maintained a weak performance at the beginning of the second quarter. As for aggregate demand, most warned that he linked two consecutive contraction quarters. Everyone noticed that the downward trend of gross fixed investment persisted.

On the other hand, the recent increase in general inflation reflected increases of both the underlying and non -underlying component, with a greater contribution of the latter.

The Governing Board with the presence of all its members, decided by majority Reduce the objective for the interbank interest rate one day to a level of 8.00%.

Jonathan Heath justified his dissident vote by mentioning that the upward path and its levels outside the volatility range have exhausted the space and there is a danger of having a rate that is not compatible with the disinflation process. He added that with this decision a message of complacency is sent to the detriment of the inflationary and substibility objective, just when the prognosis trajectory is not being fulfilled.

Mexican weight reaction

The USD/MXN was quoted in 18.66 and reacted down after the Minutes of Banxico, reaching 18.63 after its publication. At the time of writing, the par quotes over 18.63, without registering significant changes.