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Mexico Policy Rate 11.25% (consensus 11.25%) in Feb-24

• Banco de México maintained the overnight interbank interest rate at 11.25%, aligning with the consensus forecast, indicating a cautious approach in the face of a slight increase in headline inflation and persistent core inflation.
• The decision reflects concerns over the slight uptick in headline inflation, persistent core inflation levels, and the influence of both domestic economic performance and global economic conditions on future inflation trajectories.
• The central bank signals a readiness to adjust the monetary policy stance in future meetings based on the inflation outlook and economic developments, emphasizing the balance of risks, which remains biased to the upside.

Four Important EM Elections in 2024

• Elections in Indonesia and India should both result in policy continuity as far as the economy is concerned. In South Africa, the election outcome will likely lead to a further deterioration in governance. As for Mexico, MORENA will probably retain the presidency but fall short of its target two-thirds majority in the legislature.

By Alastair Newton

Mexico CPI Inflation 4.66% y-o-y (consensus 4.5%) in Dec-23

- Mexico's CPI inflation rate rose to 4.66% year-on-year in December 2023, slightly surpassing consensus expectations, marking the highest level since July 2023.
- The month-on-month CPI inflation increased by 0.71%, while core CPI inflation, excluding volatile components, undershot expectations to rise by 0.44% in the same period.

Mexico Policy Rate 11.25% (consensus 11.25%) in Dec-23

• Banco de México’s decision to maintain the overnight interbank interest rate at 11.25%, as the consensus expected, reflects a strategic balance between mitigating high inflation levels and supporting ongoing economic resilience.
• The bank’s future policy decisions will be heavily influenced by the trajectory of both headline and core inflation, alongside global economic trends, domestic economic growth and labour market strength.
• The central bank’s policy outlook will consider a range of potential risks, including persistent core inflation and global economic conditions, while remaining adaptable to new economic data, with a focus on achieving its inflation target by the second quarter of 2025.