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Mexico Policy Rate 11.0% (consensus 11.0%) in Mar-24

• Banco de México reduced the overnight interbank interest rate by 25 basis points to 11.00%, aligning with economic consensus, responding to decreasing inflationary pressures and the prospect of increased global economic activity.
• Annual headline inflation has decreased to 4.4% and core inflation to 4.64% amid economic dynamism and a strong labour market. The central bank is trying to foster growth while managing inflation expectations.
• The Governing Board will continue to assess economic and inflationary developments. It will maintain a restrictive policy stance in a cautious yet adaptable approach to ensure the orderly convergence of inflation to the 3% target.

Mexico CPI Inflation 4.4% y-o-y (consensus 4.4%) in Feb-24

- Mexico's CPI inflation for February 2024 stood at 4.4% year-on-year, in line with expectations. However, it marks the lowest growth rate since November 2023.
- The core CPI rate slowed by 12bps to 4.64% y-o-y, confirming the expected easing in underlying inflationary pressures.

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