Banxico Monetary Policy Statement - 2024-12-19
Central bank: banxico | Type: decision | Date: 2024-12-19

December 19, 2024
This document is provided for the reader’s convenience only. The translation from the official Spanish version was made by Banco de México’s
staff. Discrepancies may possibly arise between the original document in Spanish and its English translation. For this reason, the original Monetary
Policy Statement in Spanish remains the only official document.
Banco de México’s Governing Board decided to lower the target for the overnight interbank
interest rate by 25 basis points to 10.00%, effective December 20, 2024.
World economic activity is expected to have grown in the fourth quarter of 2024 at a rate similar to that
registered throughout the year . The US economy would continue its expansion. Disinflation advanced
worldwide during the year. However, headline inflation recently increased in most of the major advanced
economies, while core inflation has shown some persistence. In its latest monetary policy decision, the
US Federal Reserve cut its reference rate by 25 basis points. Government interest rates decreased and
the US dol lar appreciated. Among key global risks are the possibility of policies that revert global
economic integration, the intensification of geopolitical turmoil, the protraction of inflationary pressures,
and higher levels of volatility in financial markets.
Since the previous monetary policy decision, Mexico’s short-term government interest rates decreased
while medium- and long-term ones increased. After the Mexican peso depreciated given the possibility
of measures that could weaken integration with our main trade partner, it appreciated. Following the
significant weakness observed in the past three quarters, the Mexican economy registered a greater rate
of expansion during the third quarter of 2024 . It is expected to exhibit a lack of dynamism for the
remainder of 2024 and in 2025. As for the labor market, employment slowed down. The balance of risks
to growth of economic activity remained biased to the downside.
Annual headline inflation decreased from 4.76 to 4.55% between October and November. It is still being
affected by the supply shocks that have impacted the non-core component. Core inflation, which better
reflects inflation’s trend, continued its clear downward trend, going from 3.80 to 3.58% in the same period.
Merchandise inflation is low, while services inflation has only declined moderately. Inflation expectations
for the end of 2024 were revised downwards. Those for the end of 2025 and for longer terms remained
relatively stable at levels above target.
Looking ahead, headline and core inflation are still foreseen to follow a downward trend . However,
considering a greater persistence in services inflation, these forecasts were revised upwards. Headline
inflation is expected to converge to the target in the third quarter of 2026 (see table). The possibility that
tariffs on US imports from Mexico are implemented has added uncertainty to the forecasts. That scenario
could imply pressures on inflation on both sides of the balance. Moreover, forecasts are subject to the
following risks. On the upside: i) persistence of core inflation; ii) greater foreign exchange depreci ation;
iii) greater cost -related pressures; iv) climate-related impacts, and v) disruptions due to geopolitical
conflicts or foreign trade policies. On the downside: i) lower-than-anticipated economic activity; ii) a lower
pass-through effect from some cos t-related pressures, and iii) a lower -than-anticipated effect of the
peso’s depreciation on inflation. The balance of risks for the trajectory of inflation within the forecast
horizon remains biased to the upside. Nevertheless, the inflation outlook has been improving after the
significant shocks caused by the pandemic and the war in Ukraine. The behavior of core inflation reflects
this improvement.
The Governing Board assessed the behavior of inflation and its determinants, as well as of inflation
expectations. It considered the nature of the shocks that have affected the non-core component and the
projection that their effects on headline inflation will dissipate over the next quarters. It took into account
core inflation’s downward trajectory, the level it has attained, and the fact that it is anticipated to continue
decreasing. It estimated that, although the outlook for inflation still calls for a restrictive monetary policy
stance, its evolution implies that continuing the rate- cutting cycle and reducing the level of monetary
restriction is adequate. Thus, with the presence of all its members , the Board decided unanimously to
lower the target for the overnight interbank interest rate by 25 basis points to 10.00%.
Looking ahead, the Board expects that the inflationary environment will allow further reference rate
reductions. In view of the progress on disinflation, larger downward adjustments could be considered in
some meetings, albeit maintaining a restrictive stance. It will take into account the prospect s of global
shocks continuing to fade and the effects of the weakness in economic activity. It will consider the
incidence of the restrictive monetary policy stance that has been maintained and of the stance prevailing
in the future on the evolution of inflation throughout the horizon in which monetary policy operates.
Actions will be implemented in such a way that the reference rate remains consistent at all times with the
trajectory needed to enable an orderly and sustained convergence of headline inflation to the 3% target
during the forecast period. The central bank reaffirms its commitment with its primary mandate and the
need to continue its efforts to consolidate an environment of low and stable inflation.
1/ Forecast starting December 2024.
2/ Forecast starting November 2024. See monetary policy statement of November 14, 2024. Forecast presented in the Quarterly Report
July-September 2024.
3/ See methodological note on the seasonal adjustment process.
Source: INEGI for observed annual variation figures and Banco de México for seasonally adjusted figures and forecasts.
Note: Shaded areas correspond to observed figures.
I II III IV I II III IV I II III IV
Headline (CPI)
Current (12/19/2024) 1/ 4.6 4.8 5.0 4.6 3.8 3.5 3.4 3.3 3.2 3.1 3.0 3.0
Previous (11/14/2024) 2/ 4.6 4.8 5.0 4.7 3.9 3.4 3.1 3.0 3.0 3.0 3.0
Current (12/19/2024) 1/ 4.7 4.2 4.0 3.6 3.5 3.5 3.4 3.3 3.2 3.0 3.0 3.0
Previous (11/14/2024) 2/ 4.7 4.2 4.0 3.7 3.5 3.3 3.1 3.0 3.0 3.0 3.0
Annualized seasonally adjusted quarterly variation in percent3/
Current - Headline 1/ 5.3 4.1 5.3 3.2 3.0 3.1 4.0 3.0 2.7 2.7 3.6 3.0
Current - Core1/ 4.4 3.7 3.6 3.4 3.7 3.4 3.3 3.0 3.0 2.8 3.1 3.0
Forecasts for Headline and Core Inflation
Annual percentage change of quarterly average indices
2024 2025 2026