LatinNews Daily - 16 August 2024

*Omar Mejía, the deputy governor of Mexico’s central bank (Banxico), has explained that a prolonged decrease in core inflation and the recent economic slowdown were among the factors that contributed to the bank’s decision to cut interest rates on 8 August. The decision to lower the benchmark interest rate by 25 basis points to 10.75% - in a vote that divided the Banxico board – surprised analysts given the ongoing upwards trend in headline inflation. In an interview with Bloomberg, Mejía pointed out that the increase in inflation in July was mainly driven by non-core inflation while the core rate, the more relevant component, continued to drop. He also said that slower-than-expected economic growth would have a “downward impact on price formation”. Given these elements, Mejía argued that the rate cut “wasn’t just adequate, but opportune and efficient”. Mejía’s comments contrast with those of Jonathan Heath, one of those on Banxico’s board to vote against the rate cut, who told national daily El Universal on 14 August that the cut was “premature”.