He Bank of Mexico (Banxico) released its Report on third quarter of 2024where he reviewed lower growth for the country in 2025 of 1.2%, in contrast to the 2.3% projected Hacienda.
In the case of 2024, the expectation increased to 1.8%, from the 1.5% that had been predicted. It stands out that the report from the Mexican central bank does not have changes in its inflation forecasts or in the monetary policy rate.
In the report, he specified that the inflationary habitat will allow additional adjustments to the reference rate.
The Board maintained that the balance of risks will allow additional adjustments to the reference rate and maintained that the balance of risks for inflation remains biased upward, but highlighted the continuation of the disinflationary process, and especially the downward trajectory that the inflation.
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He Bank of Mexico highlighted that the balance of risks for economic growth remains biased by risks for growth, wich highlights lower growth in the United States that intensifies the current environment of uncertainty and that the reduction in public spending resulting from the announced fiscal consolidation has a greater effect on economic activity.
Regarding inflation, the general forecast is upward, but convergence to 3% is still expected for the fourth quarter of 2025. It is expected, according to the Mexican institution, that general inflation will close this year at 4.7% and underlying inflation at 3.7%
“The divergence between forecasts does not surprise us since we consider that Banxico tends to sacrifice its long-term projections to anchor inflation expectations around the objective. The balance of inflation risks remains biased upwards and highlights that the main upward risks are the persistence of higher underlying inflation. Recent messages…imply that the Board would be in favor of continuing the cut cycle in december.”
Even though the Ministry of Finance manages a GDP range of between 2% and 3% with an average of 2.3%, most specialized financial houses have lower expectations.
In the case of banco Bx+which presented its expectations for 2025, its chief economist, Alejandro Saldanarevised a financial slowdown for the following year by placing the GDP at 1.2%, inflation at 3.8%, the Banxico rate at 8.50% and in the case of the exchange rate it is at 20.50 units per dollar.
In this regard, Monex considered that the exchange rate will average 21 pesos per dollar (while the Treasury places it at 18.50) and the country’s growth will be barely 1%, well below what was anticipated by the Government of Mexico in the Economic Package 2025.
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banxico’s reference rate was projected for next year at 10% and inflation at 4.05%.
Janneth Quirozdirector of analysis at Monex, commented that the Trump effect can move the markets since it brings uncertainty weather or not he implements any of his policies against our country such as tariffs or tries to move what was signed in the T-MEC.
Quiroz projected that in 2025 there will be a lot of caution in investments, due to nervousness about the implications of some type of tariff on vehicles in general, on electric cars or even on all products.
“we also do not rule out a slight drop in employment, given the fear caused by Donald Trump…all these factors are what anticipate a modest growth of 1% and especially considering that we have a growth projection of 1.5% for 2024, we clearly see that Mexico’s economy will face important challenges.”
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What are teh implications of Banxico’s downward revision of growth projections for Mexico’s economy?
Interview Between Time.news editor and Financial Expert on Banxico’s Recent Report
Time.news Editor: Good day, everyone! Today, we have a special guest with us: Dr. Sofia Martinez, a renowned economist and expert in monetary policy. Dr. martinez, thank you for joining us.
Dr. sofia Martinez: Thank you for having me! It’s great to be hear.
Editor: Let’s dive straight into it.The Bank of Mexico recently released its Report for the third quarter of 2024, and there are some notable changes in economic projections. Specifically, we’ve seen a downward revision for growth in 2025 to just 1.2%. What are your thoughts on this?
Dr. Martinez: Yes, it’s quite significant. the Bank’s lowered growth prediction reflects a more cautious outlook for Mexico’s economy, notably in an habitat influenced by global economic uncertainties. The contrast with Hacienda’s projection of 2.3% suggests that there are underlying concerns about both domestic and external factors impacting growth.
Editor: Absolutely. It’s interesting to note that while the 2025 growth forecast was revised downward,the expectation for 2024 has been slightly increased to 1.8%. What might be driving this slight optimism?
Dr.Martinez: That’s a good question. The adjustment to 1.8% from 1.5% indicates that there might be some positive developments or resilience in key sectors of the economy that are expected to sustain growth in the short term. However, it’s essential to keep in mind that this still reflects a relatively slow growth rate, especially compared to pre-pandemic levels.
Editor: A key point in the report was the note that inflation forecasts did not change, nor did predictions for the monetary policy rate. Given the current economic climate, is this surprising?
Dr. Martinez: Not necessarily. The decision to maintain the inflation forecasts and the reference rate suggests that Banxico is confident in its previous assessments. They’ve indicated that the inflationary environment allows for potential adjustments to the reference rate. It signals a belief that inflation, while it may be biased upward, is not yet out of control.
Editor: So, you believe that Banxico is striking a balance between growth stimulation and inflation control?
Dr. Martinez: Exactly. They’re in a challenging position, trying to balance the need for economic growth while ensuring inflation doesn’t accelerate beyond a manageable level. Given that the balance of risks remains upward for inflation, Banxico seems poised to act if necessary, but they are also keen on allowing some room for growth.
Editor: And considering the global economic uncertainties, how do you see this impacting Mexico moving forward?
Dr.Martinez: Mexico’s economy is closely linked with the performance of its trading partners, especially the U.S. Thus, any shifts in global trade dynamics, interest rates, or economic stability can have ripple effects. If external conditions worsen, we may see further revisions on growth prospects. Conversely, any signs of stability might enable Mexico to exceed current expectations.
Editor: It sounds like we’re in for an interesting period ahead. Before we conclude, what advice would you give to businesses and investors considering Banxico’s report?
Dr. Martinez: Businesses and investors shoudl stay informed and prepared for both scenarios—slow growth with persistent inflation or potential recovery that could outpace forecasts. Flexibility and a keen eye on central bank signals will be essential. Additionally,diversifying investments can help mitigate risks involved with lower growth trajectories.
Editor: Thank you, dr. Martinez, for your insightful perspectives! We appreciate you sharing your expertise with our readers.
Dr.Martinez: Thank you for having me! It’s been a pleasure discussing these important developments.
Editor: And to our audience, stay tuned for more updates and insights on the evolving economic landscape!