MNI INTERVIEW2: Banxico Not Comfortable With Inflation - Borja
MNI (MEXICO CITY) - The board of the Central Bank of Mexico is not "comfortable" with the current level of inflation, which is slightly above the 3% target, Banxico Deputy Governor Galia Borja told MNI, though she highlighted the significant reduction in the metric.
"Headline inflation stood at 3.59% annually in January, placing it within the variability 3% range of 1 percentage point in both directions, which had not been the case since February 2021. It seems important to me to acknowledge the significant progress that disinflation has already made," Borja said in an interview.
"In this sense, the challenge in this new phase of monetary policy is to guide inflation toward the 3% target, which is what is considered the ‘last mile.’”
She stressed that Banxico has stated in its official communications that monetary policy must remain restrictive to bring inflation to 3%. (See MNI INTERVIEW: Trump Means Banxico Must Be Cautious -Heath)
"One thing is to recognize that the restrictive monetary policy stance we adopted since 2021 has yielded results, as evidenced by the current level of inflation, and another is to say that we are done and have achieved our goal,” she said.
CORE INFLATION
Core inflation remains at a high level, though it is in a clear downward trend, Borja said.
"Core inflation is the best indicator of overall inflation trends, and within it, services inflation has been particularly persistent. In Mexico, services inflation exceeded 5% and remained around that level for nearly two years, highlighting its stickiness," she noted.
"Despite significant monetary tightening, it did not decline below that threshold. This has reversed since October 2024, and in January, it stood at 4.69%. While still high, it is now showing a downward trend."
Monetary restriction is still necessary to bring inflation to the 3% target, she said, but not to the same degree as during the peak response to the shocks from the pandemic, economic shutdowns, and later, the 2022 conflict in Ukraine.