Mexico Central Bank Shrinks 2024 GDP Growth Forecast To 1.5%

• The Bank of Mexico cut its forecast for economic growth this year and next, according to the central bank's quarterly report on Wednesday, August 28, citing weaker foreign manufacturing demand, while inflation remains stubborn.
• The central bank for Latin America's No. 2 economy now expects 2024 gross domestic product growth of 1.5%, down from a previous forecast of 2.4% and 1.2% growth in 2025 from a prior forecast of 1.5%.
• Banxico, as the central bank is known, said it had reduced this forecast due to weaker-than-expected second-quarter growth, noting external demand should remain soft due to expected weakness in U.S. manufacturing as well as fewer public infrastructure projects boosting domestic construction.
• Official statistics showed that Mexico's GDP expanded 0.2% in the second quarter from the previous three months, reinforcing a slowdown trend seen since late last year.
• Furthermore, the monetary authority raised its inflation forecasts and said it sees the balance of risks regarding inflation as biased to the upside after previously regarding this as balanced. However, it maintained its forecast that both inflation metrics should converge toward its 3% target by the fourth quarter of next year.
• The bank said in its report it expects the inflationary environment to allow discussion of further cuts to the benchmark interest rate. Earlier this month, Banxico lowered its benchmark interest rate by 25 basis points to 10.75% in a divided vote, signalling that prices could still rise higher than previously expected.

 (Source: Reuters)