Mexico’s Monetary Tightening Should Continue, Central Bank Says

Jonathan Heath believes that interest rates should remain at restrictive levels in line with inflation

Jonathan Heath, deputy governor of the Bank of Mexico, speaking at an event in Mexico's Quintana Roo state.
June 09, 2023 | 12:40 PM

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Riviera Maya, Mexico — Although Mexico’s inflation is below 6%, it is not the result of monetary policy; therefore, a restrictive stance should be maintained at current levels for at least the next three central bank’s meetings, deputy governor of Banco de México, Jonathan Heath, said Friday.

“Now what we have to do is to leave the rate where it is for as long as possible to ensure that this inflation trajectory continues to fall, even accompanying it to come down already very close to our target,” Heath said in a presentation at the 12th Mexican Stock Exchange Issuers’ Forum.

Heath explained that, although inflation has shown a downward trend, it is not properly the result of the monetary policy that the Bank of Mexico initiated in 2021, but due to wider circumstances, and for this reason, he called on his audience to focus on the underlying inflation data.

“If the data evolve more or less as we are expecting, we will maintain the monetary stance for a prolonged period of time, it is not a commitment, it is what we are thinking with the data we see now,” he said.


Heath estimates that interest rates will remain at 11.25% at least until September or October. After that, and with the help of economic indicators, the bank will be able to make a decision.

“We will not change this rate in the next three [monetary policy] decisions and in the fourth, which is in November, we do not know yet, but it will depend on the evolution of the data, we will see at that time,” he explained.

He pointed out that, in case it is decided to make a downward movement, that would not mean that the bank’s board of governors is taking a monetary easing stance, but rather that it seeks to continue keeping the rate at restrictive levels in line with inflation data.


“We should maintain a restrictive monetary policy, not only between now and the end of the year, but perhaps to he middle of next year, and at that time we would already have enough information to be able to make the appropriate decisions we need to make,” he said.

The deputy governor said that, if everything goes as estimated, inflation will continue to fall as comparative data will favor; however, toward the end of the year, the data could change.

Heath said that in 2024 data could appear that could put upward pressure on inflation, such as the recent impact of the Ukrainian dam destruction by Russia.

Domestically, insecurity could also continue to pressure raw material prices, in the face of rising transportation costs, he added.