Members of the board at Mexico’s central bank, also known as Banxico, have underscored the importance of a gradual approach to any interest rate cut were to take place early in 2024, Mexico Business reported on January 5.

The board emphasised exercising prudence in commencing the easing process, advocating for meticulous and measured adjustments.

"In the first quarter meetings of 2024, when assessing the possibility of reducing the reference rate, caution will be necessary. It was pointed out that the cautious approach means that downward adjustments, when macroeconomic conditions allow, should be gradual," said the central bank.

In November, Banxico maintained the Interbank Interest Rate at 11.25%, accompanied by a shift in language within the board's report.

The phrase "prolonged time," signifying an intent to maintain existing rate levels, was replaced with "some time."

This subtle alteration suggested a potential reduction in interest rates in the first half of the forthcoming year.

Despite advancements in the country's disinflationary efforts, Banxico's Governing Board acknowledged that risks to the indicator remain tilted upward, with certain challenges potentially impeding its return to the 3% target.

“The Governing Board will closely monitor inflationary pressures, as well as all factors influencing the projected path for inflation and its expectations. It considers that to achieve the orderly and sustained convergence of general inflation to the 3% target, it will be necessary to maintain the reference rate at its current level for a certain period,” it said.

“The central bank reaffirms its commitment to its primary mandate and the need to persevere in its efforts to consolidate an environment of low and stable inflation.”