The governing board of Banco de México unanimously agreed to keep the target for the overnight interbank interest rate unchanged at 7.5%, as inflation continued to decline in the first four months of 2018, in line with previous expectations.
The central bank said annual headline inflation fell to 4.55% in April from 5.04% in March. Core inflation decreased to 3.71% from 4.02% due to monetary policy actions and the diminishing effects of shocks, and non-core inflation dropped to 7.07% from 8.03%.
Year-end headline inflation expectations decreased to 3.98% in April from 4.09% in the previous month. Medium-term and long-term inflation expectations stayed around 3.50%.
Upside risks to inflation include continued pressure on the Mexican peso due to higher external interest rates and the strength of the U.S. dollar, the bank said. Uncertainties around national elections and the negotiations on a new North American Free Trade Agreement also present risks.
In the first quarter, the Mexican economy continued to recover at a rate higher than that recorded in the previous quarter, while global economic growth moderated, Banxico said.
Higher volatility in international financial markets due to inflationary pressures, escalation of protectionist trade measures and certain geopolitical events are the downside risks to economic growth, the bank added.
Banxico said it will continue its "prudent monetary policy stance" while closely watching exchange rate fluctuations on prices, U.S. monetary policy and slack in the Mexican economy.
