Banco de Mexico’s Governor, Victoria Rodriguez, assured that the recent volatility in the Mexican peso, triggered by escalating tensions in the Middle East, does not pose a significant threat to inflation. Despite the fluctuations, Rodriguez emphasized that the central bank remains vigilant but not overly alarmed.
During an interview following Mexico’s annual banking convention, Rodriguez highlighted the rapid reversal of the peso’s plunge, attributing it to the currency’s role as a risk asset proxy. She underscored the importance of the floating exchange rate in shielding the real economy from external shocks.
The upcoming monetary policy decision on May 9 is eagerly awaited, with analysts speculating on whether borrowing costs will remain unchanged. Rodriguez reiterated the bank’s cautious approach, emphasizing gradual adjustments.
The central bank’s recent quarter-point rate cut sparked internal debate, with one board member cautioning against premature easing due to domestic market strength and inflation concerns. Rodriguez noted the peso’s strength as a factor in containing inflation, particularly affecting importers.
President Andres Manuel Lopez Obrador has touted the peso’s strength as a positive ahead of the June election. However, recent volatility prompted him to suggest that some weakening could be beneficial.
In a broader context, Rodriguez disclosed that Banco de Mexico is part of a consortium exploring tokenized central bank money and commercial bank deposits on a unified platform. The initiative aims to enhance cross-border payment efficiency, with the timeline contingent on private sector participation.
As uncertainty looms over geopolitical tensions and domestic economic factors, Banco de Mexico remains committed to navigating the currency’s fluctuations while maintaining price stability and economic resilience.
