MEXICO CITY (Reuters) -The Bank of Mexico should be more cautious cutting interest rates given the current scenario of sticky core inflation and headline inflation still above target, deputy governor Jonathan Heath said in an interview published on Wednesday.
The central bank has cut borrowing costs for ten straight meetings, most recently delivering a quarter percentage cut last month that Heath opposed.
While the annual headline inflation sits within the Bank of Mexico’s target range of 3%, plus or minus a percentage point, the goal is to get it to 3%, Heath said in an podcast by Grupo Financiero Banorte.
The annual headline rate sped up in September to 3.76%, according to official data. The central bank estimates the rate will hit 3% in the third quarter of next year.
“The inflation target is not below 4%. The inflation target we have is specific, it’s 3%. The plus or minus 1% range is a range of variability … The fact that inflation is just under 4% is irrelevant; we are not meeting the inflation target,” Heath said.
Heath noted that continued increases in labor costs and international food prices were hindering rapid convergence toward the 3% inflation target.
Core inflation, meanwhile, a closely watched indicator of price trends that strips out highly volatile prices like food and energy, ticked up to 4.28% in September – “showing no sign that it wants to go down,” Heath said.
“We shouldn’t rush into lowering the rate so aggressively,” Heath added.
(Reporting by Ana Isabel Martinez and Noe Torres; Writing by Aida Pelaez-Fernandez and Brendan O’Boyle; Editing by Brendan O’Boyle and Nick Zieminski)
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