MEXICO CITY, May 29 (Reuters) - The Bank of Mexico upwardly revised its forecasts for 2024 inflation, according to the central bank's quarterly report released on Wednesday, as persistently high consumer prices have divided its five-member board on when to resume rate cuts.
Latin America's No. 2 economy has seen uneven progress on inflation in recent months, with headline inflation ticking up even as the closely watched core indicator eased.
Annual headline inflation up after bottoming out at the end of October, ticking up to 4.78% in the first half of May, above the central bank's target of 3%, plus or minus one percentage point.
Banxico, as the central bank is known, now sees average annual inflation in the fourth quarter at 4.0%, up from a forecast of 3.5% in its previous report in February.
The bank also raised its forecast for average annual core inflation, often seen as a better indicator of price trends, to 3.8% from 3.5% in its previous report. Annual core inflation was 4.31% in early May.
While "the disinflationary process is expected to continue in the coming months," Banxico said, headline inflation is expected to converge to its target in the fourth quarter of 2025 - two quarters later than forecast in its prior quarterly report.
Still, progress has been made in bringing inflation down from its August 2022 peak, which allows the board "to assess the inflation outlook as a whole and to discuss adjustments to the reference rate at our next meetings," Bank Governor Victoria Rodriguez said in a presentation of the report.
Banxico held its benchmark rate at 11.00% in a unanimous decision announced on May 9, after a 25-basis-point reduction in March. The bank will announce its next rate decision on June 27.
"I think there is room to continue with adjustments" to the rate, Deputy Governor Omar Mejia said.
Banxico in the report said that its "governing board will closely monitor inflationary pressures (and that) going forward, it will assess the inflation outlook to discuss adjustments to the reference rate."
"June will likely be a live meeting for a rate cut, but far from guaranteed," Goldman Sachs analyst Alberto Ramos said in a note to clients. "If a rate cut does materialize, it will likely emanate from a split decision."
In the report, the central bank also lowered its forecast for 2024 economic growth to 2.4% from 2.8% in its previous report, after economic activity in the first quarter was weaker than expected. (Reporting by Brendan O'Boyle; Editing by Anthony Esposito, Rod Nickel and Marguerita Choy)
