**Banxico Lowers Interbank Rate by 25 Basis Points to 10.25%**
The Bank of Mexico (Banxico) announced a reduction of 25 basis points in its Interbank Interest Rate on November 14, 2024, setting it at 10.25%. This move marks the third consecutive cut and the fourth one this year, following a similar quarter-point deduction by the United States Federal Reserve (Fed), which adjusted its rate to a range of 4.50% to 4.75%.
Since reaching a peak of 11.25% in March 2023, Banxico has accumulated a total reduction of 100 basis points. The Bank noted that the global economic activity during the third quarter of 2024 remained similar to the previous quarter, though with varied performance across countries. While inflation in advanced economies continues to decline, some countries report rates below central banks’ targets.
Globally, financial markets have experienced significant volatility, with rising governmental interest rates and an appreciation of the U.S. dollar. Major global risks include potential reversals in economic integration, escalated geopolitical tensions, prolonged inflationary pressures, and increased market volatility.
Domestically, Mexico’s government bond interest rates for medium and long-term securities have risen, coinciding with increased volatility of the Mexican peso, largely due to the U.S. electoral process. However, Banxico noted relatively stable financial markets and a higher growth rate in national economic activity for the third quarter when compared to the stagnation of the previous quarters.
Despite overall improvement, Banxico highlighted a recent surge in general inflation to 4.76% in October, attributable to supply-side shocks affecting non-underlying components. Nevertheless, underlying inflation saw a decline to 3.80% in October. The outlook for 2024 suggests reduced short-term inflation expectations while longer-term predictions remain slightly above target levels.
Banxico remains cautious, recognizing risks to inflation from persistent underlying pressures, potential peso depreciation, cost pressures, climate impacts, and geopolitical tensions. Conversely, lower-than-expected economic activity, reduced cost pass-through, and subdued exchange rate effects could help ease inflation.
Thus, Banxico’s Board unanimously opted to lower the overnight interbank rate to 10.25%, in anticipation of further adjustments as inflationary pressures continue to subside. The central bank emphasizes its commitment to achieving a 3% inflation target, focusing on creating conditions for stable, low inflation.
**Secondary Article: Global Economic Climate Influences Interest Rate Decisions**
In recent global monetary developments, central banks worldwide are navigating complex economic landscapes characterized by fluctuating growth rates and varied inflationary trends. As major economies like the U.S. adjust their interest rates to combat inflation, emerging markets such as Mexico are closely aligning their policies to stabilize domestic economic conditions. Central banks continue to face pressures from geopolitical developments and shifts in trade dynamics, reaffirming the importance of agile monetary strategies to maintain economic equilibrium. Such synchronized global responses underscore a collective recognition of interconnected financial ecosystems. These shifts are having widespread implications, prompting further discourse on sustainable economic policies amid an increasingly interconnected global market.