Overview
- Subgovernor Jonathan Heath argues the cutting cycle should pause and that a rate increase must be considered if inflation fails to converge to the 3% target.
- The policy rate stands at 7% after December’s 25-basis-point cut, with Heath favoring holding it at an “equilibrium” level for an undetermined period based on forecasts.
- Headline inflation slowed to 3.69% year over year in December, while core inflation remained elevated around 4.33% on persistent services pressures.
- The board will assess the timing of any additional adjustments by weighing the exchange rate, soft domestic activity, and potential effects from shifts in global trade policies.
- Surveys and private projections point to 2026 inflation near or above 4%, underscoring market skepticism about a quick return to the 3% goal.