By Brendan O’Boyle
MEXICO CITY (Reuters) -Mexico’s financial system is solid and resilient, Mexico’s central bank said on Wednesday, insisting that amid rising inflation and continued trade uncertainty the banking system has enough liquidity to withstand a downturn.
“The Mexican financial system has shown resilience in a global context characterized by the slowdown in economic activity, the continued disinflationary process,” as well as trade tensions with the U.S. and the expectation of looser monetary policies worldwide, the Bank of Mexico said in its biannual financial stability report.
Banxico, as Mexico’s central bank is known, said that the country’s banking system maintains “solid levels of capitalization and liquidity” that are above regulatory minimums, and stress tests show that it can confront “simulated adverse scenarios.”
The bank’s governing board is walking a tight rope as its members work to balance flagging economic growth with rising inflation, in addition to navigating continued trade uncertainty with the U.S., Mexico’s top trading partner.
Mexico’s economic indicators indicate a challenging situation for the country: The bank’s board last month slashed its forecast for Mexico’s economic growth this year to just 0.1%, from a prior estimate of 0.6%.
The bank warned that domestic economic activity would be sluggish in coming months, although Banxico Governor Victoria Rodriguez said at the time she did not foresee a recession.
Headline inflation, meanwhile, accelerated to 4.42% in May, exceeding the upper-end of the central bank’s target range of 3%, plus or minus a percentage point.
Core inflation, which excludes volatile items like food and oil, rose to 4.06%, its highest level in almost a year.
(Reporting by Brendan O’Boyle; Editing by Emily Green and Andrea Ricci)
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