According to analysts, the Bank of Mexico (Banxico) is expected to continue lowering rates for the rest of 2024 following the release of its Q2 Quarterly Report. Economists from local and foreign banks predict rate cuts in September, November, and December, with the reference rate potentially hitting 10.00% by the end of the year. Banorte expects a 25-basis-point cut in September, Citibanamex anticipates cuts in September, November, and December, with the rate ending at 10.00%, Monex predicts a 10.25% rate by the end of the year, and Goldman Sachs foresees 25 bps cuts in each remaining meeting.
The Bank of Mexico, Banxico, is Mexico’s central bank, tasked with maintaining the value of the Mexican Peso (MXN) and setting monetary policy. Its primary goal is to keep inflation low and stable within target levels. When inflation exceeds the target of 3%, Banxico raises interest rates to curb it, making borrowing more expensive and cooling the economy. Higher interest rates typically strengthen the Mexican Peso by attracting investors with higher yields, while lower rates weaken the currency. Banxico’s interest rate decisions are influenced by the US Federal Reserve, with the rate differential between the two banks being a key factor.
Banxico meets eight times a year to determine monetary policy, with its decisions often following those of the US Federal Reserve. The central bank looks to the Fed for guidance and sometimes acts before the Fed in response to economic conditions. For example, during the Covid-19 pandemic, Banxico raised rates before the Fed to prevent a sharp depreciation of the Mexican Peso and to avoid capital outflows that could destabilize the economy. By coordinating with the Fed, Banxico aims to maintain stability in the Mexican economy and currency.
Analysts and economists closely monitor Banxico’s decisions and statements to anticipate future interest rate moves. The expectations for rate cuts in the remaining months of 2024 reflect the current economic conditions and forecasts for inflation. By lowering rates, Banxico aims to stimulate economic growth and support businesses and consumers through easier access to credit. The central bank’s actions can also impact the Mexican Peso’s value in international markets, making it important for investors and businesses to understand and anticipate these changes.
In conclusion, the Bank of Mexico’s upcoming rate cuts are expected to support economic recovery and maintain stability in the financial markets. Analysts predict multiple cuts in the remaining meetings of 2024, with the potential for the reference rate to reach 10.00% by the end of the year. By aligning its monetary policy with the US Federal Reserve, Banxico aims to navigate through economic challenges and maintain confidence in the Mexican economy. Investors, businesses, and consumers will continue to monitor Banxico’s decisions and statements to assess the impact on interest rates and the Mexican Peso.
