Banxico minutes reveal moderate easing bias amid inflation uptick

Banco de Mexico (Banxico) revealed its last meeting minutes, in which the Mexican Central Bank cut rates by 50 basis points (bps) in a split vote of 4 to 1, with Deputy Governor Jonathan Heath wanting to keep rates unchanged as inflation edged up.

From a general standpoint, Banxico's board revealed that all the members noted that inflation has increased since the previous monetary policy decision. Most board members added that the current inflationary pressures would not be long-lasting, while one board member argued that this would be the final 50-bps adjustment.

Key quotes

ALL BOARD MEMBERS NOTED THAT CORE INFLATION INCREASED SINCE PREVIOUS MONETARY POLICY DECISION

MOST BOARD MEMBERS HIGHLIGHTED THAT INTERNATIONAL FINANCIAL MARKETS CONTINUED EXHIBITING VOLATILITY IN LIGHT OF THE PREVAILING TRADE UNCERTAINTY

MOST BOARD MEMBERS COMMENTED ON THE FAVORABLE BEHAVIOR OF MEDIUM-TERM INFLATION DETERMINANTS, WHICH SUGGESTS THAT THE PRESSURES CURRENTLY FACED WILL NOT BE LONG LASTING

MOST BOARD MEMBERS MENTIONED THE POSSIBILITY OF SUPPLY SHOCKS EXERTING ADDITIONAL PRESSURES ON PRICES

ONE BOARD MEMBER ONE MEMBER ARGUED THAT THIS WOULD BE THE FINAL 50-BASIS-POINT ADJUSTMENT

ONE BOARD MEMBERSAID THE LEVEL OF MONETARY RESTRICTION HAS BEEN REDUCED, CONSIDERING THAT A GREATER AMOUNT OF SLACK WILL CONTRIBUTE TO EASE INFLATIONARY PRESSURES

SOME BOARD MEMBERS HIGHLIGHTED THAT MEDIUM- AND LONGTERM INFLATION EXPECTATIONS REMAINED STABLE

ONE BOARD MEMBER SAID THERE TOLERANCE OR INDIFFERENCE REGARDING THE CURRENT LEVELS OR THE RECENT INCREASE IN INFLATION

BOARD MEMBER WHO VOTED TO HOLD RATE SAID JUNE DECISION JEOPARDIZES MAINTAINING A SUFFICIENTLY RESTRICTIVE POLICY STANCE BECAUSE IT BRINGS IT NEAR THE UPPER RANGE OF THE NEUTRAL RATE