The central bank has picked up a machete and lopped off a good part of its previous 2019 economic growth forecast.

The Bank of México (Banxico) on Wednesday cut its growth outlook to a range between 0.2% and 0.7% from the 0.8% to 1.8% GDP expansion it predicted in May.

Banxico said in its second-quarter report that its downward revision was the result of data released by the statistics agency Inegi last week that showed that growth was 0.0% between April and June – 0.1% less than previously reported – as well as more modest forecasts for industrial production in the United States and oil production in Mexico.

The Inegi data indicates a greater weakening of domestic demand than previously anticipated, the bank said.

It is the fifth time that Banxico has cut its outlook for 2019 since it predicted growth of between 2.2% and 3.2% in November 2017. Further downward revisions came in August and November of 2018 and February and May this year.

The central bank also cut its 2020 growth outlook on Wednesday to between 1.5% and 2.5% from a range of 1.7% to 2.7%.

Banxico predicted the creation of between 450,000 and 550,000 formal sector jobs this year, a reduction of 80,000 at both ends of the range compared to its previous report.

The bank cut its inflation rate outlook to 3.2% for the end of the year and predicted that price pressures will continue to decline during the next four quarters.

The downward revisions to both growth and inflation outlooks could lead to another reduction in interest rates, which the Bank of México cut for the first time in five years this month, citing slowing economic growth and lower inflation.

Many analysts said they expected the bank to make a further cut or cuts to the current rate of 8% before the end of the year.

Source: El Financiero (sp)