By Brendan O’Boyle and Isabel Woodford
MEXICO CITY (Reuters) – The Bank of Mexico maintained its benchmark interest at 11.25% on Thursday, signaling it will hold the rate “for an extended period” as inflation in Latin America’s second largest economy slows but remains above the bank’s target.
The unanimous decision by the central bank’s five-member board was in line with analysts’ forecasts and came as data shows annual inflation at its lowest in more than two years.
Banxico first paused its rate hikes in May after a nearly two-year hiking cycle that began in June 2021 and brought the interest rate up by 725 basis points to combat rising consumer prices.
The central bank forecast that “the inflationary outlook will be complicated and uncertain throughout the entire forecast horizon, with upward risks.”
Official data published earlier in the day showed consumer prices rose less than expected in early June, with annual headline inflation slowing to 5.18% in the first half of the month, the lowest since March 2021.
Annual core inflation, which strips out some volatile food and energy prices, was at 6.91%.
Banxico, as Mexico’s central bank is known, targets inflation at 3%, plus or minus a percentage point.
“In order to achieve an orderly and sustained convergence of headline inflation to the 3% target, (the board) considers that it will be necessary to maintain the reference rate at its current level for an extended period,” Banxico said in a statement announcing its rate decision.
Banxico made marginal adjustments to its inflation forecasts through the end of the year and said that inflation was still forecast to converge to its 3% target in the fourth quarter 2024.
(Reporting by Brendan O’Boyle and Isabel Woodford; Editing by Anthony Esposito and Alistair Bell)
