MEXICO CITY (Reuters) – The Bank of Mexico cut its forecast for economic growth this year and next, according to the central bank’s quarterly report released on Wednesday, amid stubborn inflation that has sown division in the central bank’s board.
The central bank now expects 2024 gross domestic product (GDP) growth of 1.5%, down from a previous forecast of 2.4%, and growth of 1.2% next year from a prior forecast of 1.5%.
Banxico, as the central bank is known, said it had reduced this forecast due to a second-quarter growth that landed “significantly” below forecasts, and noted that external demand should remain soft due to expected weakness in the U.S. manufacturing sector.
The monetary authority also edged up its fourth-quarter core inflation forecast for this year to 3.9% from 3.8%, while maintaining its prediction for the 2025 figure at 3%.
Headline inflation, meanwhile, is expected to hit 4.4% by the last quarter of this year, up from a prior guidance of 4%, while the 2025 figure remains at 3% – the central bank’s target level.
The central bank pointed to expected price rises affecting produce and energy, as well as stubborn services inflation, which the report said “remains high without showing a clear sign of going down.”
Annual inflation in Latin America’s No. 2 economy was running at 5.16% in the first half of August, gradually cooling from a two-decade peak in 2022 while remaining stubbornly far from the 3% target.
However, the bank said in its report it expects the inflationary environment to allow discussion of further cuts to the benchmark interest rate.
(Reporting by Sarah Morland; Editing by Cassandra Garrison and Sarah Kinosian)
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