*Mexico’s central bank (Banxico) has announced that it is holding its benchmark interest rate at 11.25%, breaking a rate-hiking cycle of almost two years. Banxico had raised its benchmark interest rate by 725 basis points since starting the raising cycle in June 2021. Banxico’s board, which unanimously agreed on the decision, noted that headline inflation continued to decrease in the majority of economies, although remaining high. It also noted that both headline and core inflation in Mexico had decreased in recent months, with annual rates standing at 6.25% and 7.67% in April respectively. However, Banxico warned that it would be “necessary to maintain the reference rate at its current level for an extended period” in order to reach target inflation of 3%. The central bank does not forecast inflation hitting this target until the end of 2024, highlighting that the inflationary outlook will be “complicated and uncertain” throughout the entire forecast horizon. The decision to halt the interest rate hikes comes as the Mexican peso continues to perform well against the US dollar, reaching a rate of M$17.42 to the dollar on 15 May, its best rate in seven years.
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