Banxico Governor Tells Newspaper Policymakers May Mull Faster Easing

(Bloomberg) -- Mexico’s central bank could mull changes to the magnitude of its interest rate cuts in coming meetings, Governor Victoria Rodriguez Ceja said in an interview with El Financiero, opening the door to faster easing.

To change the rate-cut pace, there must be no new inflationary shocks and the outlook should remain favorable, Rodriguez said in the interview published Monday. Recent price pressures have eased but not completely dissipated, and Mexico still needs a restrictive monetary policy stance, she said.

“In my opinion, we could assess the magnitude of the adjustments,” Rodriguez told El Financiero.

Banxico, as the central bank is known, cut its key interest rate by a quarter-point for the second straight meeting on Sept. 26. Policymakers lowered borrowing costs as inflation eases faster than expected and the economy heads for a year of slower growth. The institution’s decision was split, with Deputy Governor Jonathan Heath the lone member voting to keep rates at 10.75%.

Banxico took into account the slowdown in both non-core and core inflation when it cut rates last week, Rodriguez told El Financiero. Policymakers also weighed the economic outlook both domestically and internationally, she said.

Annual inflation slowed to 4.66% in the first two weeks of September, almost a full percentage point lower than the mid-July print. The core component which excludes volatile items has also decelerated, coming down to 3.95%. 

The central bank targets inflation at 3%, plus or minus a percentage point. 

In the statement with its September decision, Banxico said looking ahead the board expects that the inflationary environment will allow further rate adjustments. 

That guidance was different from the prior statement, when the bank said that the inflationary environment may allow it to discuss further rate adjustments. 

The change in the guidance reflects an improvement in the inflationary outlook, Rodriguez said Thursday in a separate interview with Enfoque Noticias. 

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