Banxico Deputy Governor urges caution on rate cuts amid sticky inflation

Banco de Mexico (Banxico) Deputy Governor Jonathan Heath crossed the newswires in a podcast by Grupo Financiero Banorte on Wednesday. He reiterated the central bank should be more cautious in cutting interest rates, given the scenario of sticky core inflation, and headline inflation remaining above target.

Banxico had cut rates for ten consecutive meetings, including the September 25 reunion, in which the bank slashed rates 25 basis points, on a 4-1 vote split, with Heath voting to hold rates.

Heath said, "The inflation target is not below 4%. The inflation target we have is specific, it's 3%. The plus or minus 1% range is a range of variability ... The fact that inflation is just under 4% is irrelevant; we are not meeting the inflation target."

He observed that continued increases in labor costs and internation food prices are slowing inflation convergence towards Banxico's 3% goal. Regarding core inflation which rose to 4.28% in September, said that is "showing no sign that it wants to go down."

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