Banxico Monetary Policy Statement - 2024-09-26
Central bank: banxico | Type: decision | Date: 2024-09-26

September 26, 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 10.50%, effective September 27, 2024.
Available indicators suggest that during the third quarter of 2024 world economic activity grew at a rate
similar to that of the previous quarter, although with a heterogeneous performance across countries. In
advanced economies, headline inflation is moving closer to their central banks’ targets, as compared to
the beginning of the year. The US Federal Reserve cut its reference rate by 50 basis points. Other central
banks also lowered their reference rates but in lesser magnitude while some of them left them
unchanged. Volatility in international financial markets eased and government interest rates decreased.
Among key global risks are the intensification of geopolitical turmoil, the protraction of inflationary
pressures, greater volatility in international financial markets, and, to a lesser extent, t he challenges to
financial stability.
Since the previous monetary policy decision, the Mexican peso has remained highly volatile. The
government bond yield curve decreased, especially at the short end. Mexico’s economic activity is
undergoing a period of weakness, in a context of high uncertainty caused by external and domestic
factors. As for the labor market, employment has slowed down. The balance of risks to growth of
economic activity remains biased to the downside.
Annual headline inflation decreased from 5.57% in July to 4.66% in the first fortnight of September due
to a partial reversal in the supply shocks that have affected the non -core component. In addition, core
inflation continued trending downwards, registering 3.95% in the first fortnight of September.
Expectations for headline inflation for the end of 2024 were revised upwards. In contrast, those for core
inflation decreased. Those for longer terms remained relatively stable at levels above target.
The forecasts for headline and co re inflation were revised slightly downwards for some quarters in the
short term. Headline inflation is still expected to converge to the target in the fourth quarter of 2025 (see
table). These projections are subject to risks. On the upside: i) persistence of core inflation; ii) greater foreign
exchange depreciation; iii) greater cost-related pressures; iv) climate-related impacts, and v) the
intensification of geopolitical conflicts. On the downside: i) lower-than-anticipated economic activity; ii) a
lower pass-through effect from some cost-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 current levels of core inflation
along with prospects that it will continue decreasing show 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 continue dissipating over the next quarters. It took
into account core inflation’s trajectory 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 it is adequate to reduce the level of monetary restriction. Thus, with the presence
of all its members, the Board decided by majority to lower the target for the overnight interbank interest
rate to 10.50%.
Looking ahead, the Board expects that the inflationary environment will allow further reference rate
adjustments. It will consider that global shocks will continue fading and the effects of the weakness in
economic activity. It will take into account the incidence of the monetary policy stance that has been
maintained and that prevailing in the future on the evolution of inflation throughout the horizon in which
monetary policy operates. Actions will be implemented i n 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.
Voting in favor of the decision were Victoria Rodríguez, Galia Borja, Irene Espinosa, and Omar Mejía.
Voting in favor of maintaining the target for the overnight interbank interest rate at 10.75% was Jonathan
Heath.
1/ Forecast starting September 2024.
2/ Forecast starting August 2024. See monetary policy statement of August 8, 2024. Forecast presented in the Quarterly Report April-June 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.
IV I II III IV I II III IV I II III
Headline (CPI)
Current (09/26/2024) 1/ 4.4 4.6 4.8 5.1 4.3 3.7 3.3 3.1 3.0 3.0 3.0 3.0
Previous (08/08/2024) 2/ 4.4 4.6 4.8 5.2 4.4 3.7 3.3 3.1 3.0 3.0 3.0
Current (09/26/2024) 1/ 5.3 4.7 4.2 4.0 3.8 3.5 3.3 3.1 3.0 3.0 3.0 3.0
Previous (08/08/2024) 2/ 5.3 4.7 4.2 4.0 3.9 3.6 3.3 3.1 3.0 3.0 3.0
Annualized seasonally adjusted quarterly variation in percent3/
Current - Headline 1/ 5.2 5.3 4.3 4.9 2.6 3.0 3.0 3.7 2.2 3.0 3.1 3.4
Current - Core1/ 4.7 4.3 3.7 3.5 3.7 3.2 2.7 3.0 3.0 3.0 2.8 3.0
Forecasts for Headline and Core Inflation
Annual percentage change of quarterly average indices
2024 2025 2026