Banxico's Contested Rate Cut Isn't the Real Problem
A rare sighting of Banxico’s invisible woman.
Photographer: Alejandro Cegarra/Bloomberg via Getty Images
As interest-rate decisions go, the Bank of Mexico’s cut last month ranks among the most contentious in years.
It was, in the end, an awkward moment for the central bank known as Banxico to trim the benchmark rate by 25 basis points to 6.75%. Inflation rose to 4.63% in the first half of March, while the core gauge has hovered above the 4% upper bound of the target range for nearly a year. At the same time, the war in the Middle East has injected fresh uncertainty into financial markets and pushed up energy costs. The accompanying statement was laden with warnings about renewed price pressures, making the decision to cut all the more puzzling. In this context, holding rates steady, as two of the five board members argued, would have been more prudent.