Recent economic developments in Mexico indicate a significant shift in monetary policy as inflation shows signs of easing. On December 19, 2024, Mexico's central bank, Banxico, announced its fourth consecutive interest rate cut, reducing rates by a quarter-point to 10%. This decision was unanimous, with 21 out of 29 economists forecasting this move, reflecting growing confidence in the slowing inflation trend [9df229e7].
Inflation in Mexico decreased to an annual rate of 4.55% in November, down from a peak of 5.57% in July. Core inflation also reached a notable low of 3.58%, marking the lowest level in 4.5 years. This decline in inflation has allowed Banxico to adjust its monetary policy to stimulate economic growth, with GDP growth forecasts set at 1.8% for 2024 and 1.2% for 2025 [9df229e7].
In contrast, Brazil continues to grapple with rising inflation, which recently surged by 4.47%. The Brazilian central bank has responded by increasing borrowing rates to 10.75%, with expectations that rates may peak at 13%. The inflationary pressures in Brazil are primarily driven by significant increases in electricity and food prices, alongside challenges posed by fiscal expansion and climate-related issues [4cb16a9c].
As both countries navigate their economic landscapes, the implications of these divergent monetary policies are significant. While Mexico aims to bolster growth through rate cuts amidst a stabilizing inflation environment, Brazil's approach focuses on curbing inflation without hindering economic growth. The broader economic context, including potential trade tensions with the U.S. under President Donald Trump, adds another layer of complexity to Mexico's economic outlook [9df229e7].