Banxico’s Heath says rate cuts can wait as core inflation persists

The Bank of Mexico (Banxico) Deputy Governor Jonathan Heath said that the central bank can wait to reduce interest rates, signaling that further easing is possible but in about a year or more, as he qualified the current monetary policy stance as “appropriate.”

In a podcast with Banorte, Heath said: “I think where we are now, it is appropriate to stop,” adding that the only way to cut is if core inflation converges to Banxico’s 3% goal.

Even though the disinflation process progressed, Heath warned that it is too soon to declare victory, because headline inflation dropped mainly due to non-core components, which are volatile and less influenced by the central bank’s policy.

He recognized that persistent inflation stems from service inflation and sees inflation risks tilted to the upside.