If the Bank of Mexico wanted to bring inflation to 3 percent as its own objective requires, it would have to take actions that convince decision-makers that inflation will decrease. One possibility is that inflation never reaches 3 percent more than occasionally and briefly, if we are lucky. More specifically, the institution has the goal that annual inflation be 3 percent. Most likely, inflation will stay indefinitely around 4 percent. Upon entering the central bank's website, it can be clearly read that 'The primary objective of the Bank of Mexico is to maintain low and stable inflation.' Not only will it move away from the central bank's target, but it will frequently be outside the acceptable range of variability, as is currently the case. The Board of Governors has lowered the interest rate on several occasions despite the fact that inflation is not under control (in a clear trend towards 3 percent). When the central bank makes it clear that its primary objective is not low and stable inflation, it loses credibility and it will become increasingly difficult to achieve a reduction in inflation. If companies believe that inflation will be 3 percent, that will be the price increase they expect from their inputs, that will be the wage increase they can offer, and that will be the price increase of their competitors and their own prices. An indicator of the damage already caused is that the specialists surveyed by the central bank themselves expect an inflation of 4.2 percent towards the end of 2026 and 3.8 for 2027. General inflation had remained below 4 percent thanks to the prices that the monetary authority controls the least, that is, by luck. This is exactly the opposite of what would be expected when inflation increases. General inflation went from 3.8 to 4.6 percent between the first half of January and the first half of March. Faced with this situation, the Bank of Mexico should not have lowered the interest rate because it is pouring fuel on the fire of inflation. This would normally imply increases in the interest rate, so the cost of reducing inflation is greater (sharp increases in the interest rate to convince that the inflation target is pursued with seriousness). Third problem. If the central bank keeps the prices it controls (core inflation) close to 3 percent, the more volatile prices over which it has less control (non-core), such as tomatoes and gasoline, could bring inflation closer to 2 or 4 percent. The problem is that the inflation the central bank should control (core inflation) is above 4 percent (4.4 percent in the first half of March) and has remained there since May 2025. On March 26, its Board of Governors announced its decision to reduce the interest rate by a quarter of a percentage point despite the fact that inflation had risen to 4.6 percent in the first half of March 2026. The cost of reducing inflation increases due to the loss of credibility. The primary objective of the central bank is clear, but this institution disregards its mandate for other considerations, showing its indifference to caring for the purchasing power of Mexicans, which is precisely its main responsibility. Second problem. The logical consequence of the above is that the Bank of Mexico will face a dilemma in the future. The risk of permanently high inflation. This had already caused economic experts to question its credibility at the beginning of this year. It shows that the Bank of Mexico does not care about the purchasing power of Mexicans. The decision of March 26 is the culmination of bad decisions because it is made at a time when inflation has grown strongly and is clearly outside any acceptable range for the central bank. The other possibility is to have to raise interest rates sharply to meet its target. This target is allowed to vary by one percentage point, which means that 2 or 4 percent is acceptable. Lowering the interest rate in that context evidences that the Bank of Mexico has subordinated its main objective—protecting the purchasing power of Mexican families—to other considerations. The Bank of Mexico has been heavily criticized recently. Why has this decision been so criticized? What are its implications? First problem. This problem is a consequence of the previous one.
