On November 10, majority of the members of the Governing Board of Bank of Mexico (Banxico) decided to increase the reference interest rate by 75 base points, from 9.25 to 10 percent. But the deputy governor,Gerardo Esquivelvvoted for an increase of only 50 basis points considering that it is important to send a signal that the central bank is nearing the end of the cycle of increases.

“I consider it necessary to begin to reduce the rate of increases. This would indicate that we are approaching the terminal rate of the cycle, and would be consistent with the current balance of risks”, said Gerardo Esquivel at the last monetary policy meeting.

According to the Minutes of the Banxico Governing Board meetingdue to the monetary policy decision announced on November 10, 2022Esquivel explained that MMexico faces two possible risks: that of insufficient tightening (which could translate into persistent inflation that is costly to reverse), and that of excessive tighteningwhich would affect macroeconomic and financial stability.

He added that as the interest rate has increased, the first risk has decreased, while the second has increased. with the first, External inflationary pressures have begun to ease because the ex-ante real interest rate is already considerably above its neutral level.

“It doesn’t seem necessary to push much more. What is required is to allow the restrictive monetary stance reached, which operates with a lag, to continue operating. It is important to point out that the proposed increase (of 50 basis points in the interest rate) would imply separating from the Federal Reserve and reducing the rate differential with the United States”, said the deputy governor.

He added that se argues that this should be avoided to prevent currency and financial instability; nevertheless, recently the mexican peso has appreciated significantly against the dollar and other currencies and this provides an unbeatable opportunity to make the aforementioned adjustment with minimal risk.

other opinions

The Banxico minutes revealed other positions of the members of the Governing Board. One member considered thate, since the last monetary policy meeting, The Mexican economy has continued to face a complex and uncertain environment, characterized by deep, widespread and persistent inflationary pressures, as well as by tight monetary and financial conditions globally.

He stressed that in the face of deep and persistent inflationary shocks, a tight monetary policy stance is required to contain inflation and contribute to the fact that it begins to decrease towards the central bank’s goal. He pointed out that youAn upward adjustment of 75 base points in the reference rate would allowin terms of the absolute monetary stance, the ex-ante real rate is unequivocally consolidated in restrictive territory.

Another member specified that the upward trend of the underlying index and the growing pressures it faces complicate the outlook for monetary policy. He considered that, despite the significant adjustments in the monetary stance, a turning point in the inflation trend has not yet been observed.

He argued that they face, on the one hand, high and persistent inflation levels with an upward biased balance of risks and, on the other, a more dynamic economic activity than expected with an output gap that continues to narrow. He added that there are also pressures on inflation coming from the labor market. He highlighted that all of the above occurs in an external context that has become significantly more adverse.

Another member considered it necessary to continue consolidating a restrictive monetary stance, maintaining the pace of the previous decision given the upward trend in core inflation; the deterioration of inflationary expectations; a balance of risks for inflation that is considerably upwards biased; and an inflation forecast that anticipates a convergence to the distant goal.

He argued that reducing the rate of increases should only be considered when the inflationary outlook improves.particularly of the underlying component.

One more member considered that it is necessary to continue with the monetary tightening for the following reasons: general inflation remains at high levels and its convergence to the target presents significant challenges; core inflation maintains an upward trend that must be contained to allow inflation to converge on its target; inflation expectations have continued to deteriorate, which has made it difficult for the real interest rate to increase proportionally with the nominal rate adjustments implemented; and a more balanced balance of risks for inflation needs to be consolidated.


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