Mexico's central bank, the Bank of Mexico (Banxico), is expected to vote unanimously to hold borrowing costs at 11% at its next meeting in May, according to Deputy Governor Jonathan Heath. The decision comes after Banxico's rate cut in March, which was seen as the first adjustment rather than part of rapid policy normalization. Consumer price rises have slowed to 4.42% from a year prior, with core measures excluding energy and food also showing a decrease. The central bank aims to see a steady downward trend in consumer price increases, particularly in services inflation. While the bank is currently at an acceptable rate differential with the US, its rate decisions in May and June will be independent from the Federal Reserve [1962d274].
The Mexican Peso (MXN) has been relatively stable following Banxico's rate cut in March. The decision to pause rate cuts may provide further support for the currency. The USD/MXN exchange rate is influenced by the interest rate differential between Mexico and the United States. With Banxico's decision to hold rates steady, the interest rate gap between the two countries is likely to remain unchanged, potentially keeping the MXN strong against the USD [1962d274].
Meanwhile, Paraguay's central bank surprised analysts by keeping its benchmark interest rate unchanged at 6%. The decision was attributed to rising uncertainty about oil prices and the timing of US rate cuts. Analysts had expected a quarter-point cut. The central bank of Paraguay has already lowered borrowing costs by 250 basis points since the start of its easing cycle in August. The decision to pause rate cuts indicates caution in the face of potential risks and uncertainties [50c63043].
In Colombia, inflation stopped slowing in May for the first time in more than a year, potentially weakening the case for the central bank to heed the government’s calls for faster interest rate cuts. Consumer prices rose 7.16% in May from a year earlier, the statistics agency said. President Gustavo Petro, Finance Minister Ricardo Bonilla, and some of the nation’s biggest financiers have all urged the central bank to speed up monetary easing to revive economic growth. But policymakers have so far been cautious for fear that inflation won’t slow to its target fast enough. The peso has weakened amid fears that the government won’t meet its fiscal targets, potentially adding to inflationary pressures. Policymakers have cut their key interest rate by 1.5 percentage points since December. Even so, the current rate of 11.75% remains the highest among major inflation-targeting economies in Latin America. The bank holds its next policy meeting on June 28 [6d14ad7f].
The Philippine central bank, the Bangko Sentral ng Pilipinas (BSP), is expected to lower interest rates after the US Federal Reserve, according to a report by BMI Country Risk & Industry Research. The report suggests that the BSP's next move will be a cut, but it will only happen when the Fed starts its own policy easing. The report was released on June 28, 2024 [736af6f5].