The Central Bank of Mexico will release its interest rate decision today. Since March, the Bank has held benchmark rates
The Central Bank of Mexico will release its interest rate decision today.
Since March, the Bank has held benchmark rates at 4%. Driven by skyrocketing food and fuel prices, inflation has risen significantly above the central bank’s target rate. Despite the economic rebound in 2021—with GDP growing 4.7% from negative 8.2% in 2020—partial mobility restrictions and a slow vaccine rollout continue to tamper business prospects and financial performance of Mexican banks.
As inflation accelerated to 6.08% in April—the highest level since 2017—it will likely reinforce expectations that Mexico’s central bank will maintain the benchmark interest rate at its current level at least until the end of the year. In the medium-term, expect the deterioration of the country’s fiscal accounts and economic contraction to be contained if the evolution of foreign trade with the US in manufactured products, as well as Washington’s economic recovery continues to boost activity in the Mexican economy. Ahead of the upcoming legislative elections on June 6, the government will try its best to maintain steady commercial relations with Washington to reactivate value chains in an attempt to stabilize the population’s purchasing power and gain voter confidence.