The majority of the board of directors of Mexico’s central bank recognizes the persistent uncertainty about price pressures derived from the tariffs that the Mexican government has recently imposed on Asian imports, although he described the possible inflationary impact as “temporary and limited.”
The preliminary assessment of import tariffs, in force for two months and supported by President Claudia Sheinbaum, was included in the minutes of the most recent monetary policy meeting.
Banxico, as the central bank is known, decided earlier this month to pause the prolonged cycle of interest rate cuts, in part because of the need to evaluate “the speed and magnitude with which the transfer of the increase in tariffs to prices will materialize,” according to minutes released Thursday.
Since the beginning of this year, tariffs of up to 50% have been applied to more than 1,400 categories of products imported from Asian countries without a trade agreement with Mexico. including China, South Korea and India. The new levies cover goods ranging from clothing to metals and auto parts.
In the minutesthe majority of Banxico board members indicated that the new tariffs will only impact 6.3% of Mexican imports, while some members highlighted that Mexico’s average tariff on imports rose from 2.2% to 3.4% as a result of the measure.
Until now, Inflation has been little affected by tariffs, but their impact “could manifest itself more gradually throughout the year,” according to some members of the Banxico governing board.
The governing board as a whole indicated that it also will evaluate the effect on prices of new taxes applied to products such as sugary drinks and online sales, which came into effect on January 1.
Banxico kept its reference interest rate unchanged at 7% in a unanimous decision on February 5, which put on hold a cycle of easing that began almost two years ago, while core inflation remains persistently above the upper limit of the 3% target range, plus or minus one percentage point.
Then, The board indicated that going forward it will evaluate additional adjustments to the key interest rate, although he did not offer further details.
Banxico also postponed its forecast for when general inflation will converge to the target, now until the second quarter of 2027. I previously estimated that inflation would slow towards the target in the third quarter of this year. The adjustment responded “mainly to a higher-than-expected trajectory of underlying inflation,” the central bank explained.
Long break?
In a dissenting opinion, Deputy Governor Jonathan Heath argued that, Despite the upward revision of the bank’s inflation forecast, it is still below other surveys. He affirmed that the balance of risks for inflation remains biased upwards and disagreed that it is “more balanced,” as Banxico indicated in its most recent monetary policy decision.
Heath added that A lowering of the interest rate in the next decisions would be “premature.” He had previously said the bank could resume cuts in March.
In the minutes, Most Banxico members indicated that a more gradual slowdown in inflation is anticipated.
A board member noted that Last year no progress was made to contain inflation. He added that keeping the interest rate unchanged only in the February decision would not be enough, but rather a prolonged pause is required until there is evidence that inflation will converge to the bank’s 3% target.
Consumer prices rose 3.79% in January compared to the same month of the previous year. The figure was slightly below the average estimate of 3.82% of analysts surveyed by Bloomberg, but above the 3.69% recorded in December. Core inflation, which excluding volatile food and fuel prices, accelerated to 4.52%, from 4.33% in December.
Without a clear downward trend in inflation towards the second half of 2026, the interest rate reduction will have to wait even longer, that member added.
