Mexico’s central bank kept its key interest rate steady at 4.0%

Mexico’s central bank on Thursday kept its key interest rate steady at 4.0%, as expected.

The central bank said  that in a highly uncertain environment, the risks for inflation, economic activity and financial markets pose major challenges for monetary policy.

Key notes

Mexico’s central bank set the  benchmark interest rate at 4.0%.

Mexico central bank says the board was unanimous on rate decision.

Mexican central bank says in a highly uncertain environment, the risks for inflation, economic activity and financial markets pose major challenges for monetary policy.

Mexican central bank says headline inflation expectations for the end of 2021 were adjusted upwards and those for the medium and long terms remained stable at levels above the 3% target.

Mexican central bank says Mexico economic activity decelerated in January and February and, although a greater boost from external demand is foreseen, ample slack conditions are expected throughout the forecast horizon.

Mexico central bank says among the most relevant global risks are the pandemic, delays in the vaccination programs, and a greater tightening of financing conditions.

Mexico’s central bank says the anticipated paths for headline and core inflation in the short term are slightly above those foreseen in the last quarterly report.

Mexico’s central bank says over the next months, headline inflation will be temporarily affected by the arithmetic effects generated by last year’s fall in energy prices.

Mexico central bank says forecasts are subject to risks, on the upside are recomposition of spending towards merchandise or cost-related pressures; episodes of exchange rate depreciation; and external inflationary pressures.

Mexican central bank says on the downside are effects stemming from the negative output gap; greater social distancing measures; and foreign exchange appreciation.

Mexico central bank says necessary to safeguard institutional framework, strengthen macroeconomic fundamentals and adopt necessary actions on monetary and fiscal policy fronts.

Mexico central bank says  it is necessary to enable an orderly adjustment of financial conditions and a change in relative prices, without affecting price formation and inflation expectations.