This year, the central bank has made four cuts of 50 basis points and three of 25. Victoria Rodríguez has signaled another possible rate cut by the end of the year. Days earlier, Rodríguez Ceja also stated in an interview that she saw a 'highly probable cut of the same magnitude in December,' saying the move would not come as a surprise to the market, which already factors it into its projections. On the other hand, Deputy Governor Mejía also defended the central bank's forecast that inflation will be at 3% by year-end, based on three factors—in addition to monetary policy itself: the normalization of agricultural production, the strength of the peso, and the stagnation of the economy. While he estimates that the economy will recover in 2024, he considers it will be moderate, driven mainly by manufacturing in the United States and also a certain recovery in investment, as well as domestic consumption. The deputy governor pointed out that one of the strongest pressures on inflation comes from the core component, particularly from goods and services, and highlighted that in both cases, the food factor is the one that generates the most pressure from perishable products. In this sense, he noted that it is expected that production conditions will normalize going forward and be 'an element that plays in favor of a more moderate behavior of food service inflation, which has shown the most persistence.' Following Governor Victoria Rodríguez's statements, Deputy Governor Omar Mejía has now reinforced the signal that the cycle of interest rate cuts by the Bank of Mexico (Banxico) is not over, after the 25 basis point cut this November. In an interview for the Banorte podcast published this Wednesday, the official considered that 'the phase in this cutting cycle will continue under a gradual approach.' His words confirm the market consensus expectation that anticipates another 25 basis point cut for December, with which the interest rate will close the year at 7%. In this sense, he also justified that the interest rate is still at a restrictive level, that is, he estimates it will continue to have a downward effect on inflation. The comment is relevant as some analysts have warned that with the cycle of cuts, the central bank is approaching a neutral rate, which would mean adjustments would no longer have an effect on consumer prices. However, Mejía recalled that the neutral rate estimated by the central bank is 2.7%.
