Mexico cut interest rates for a fourth straight meeting Thursday as inflation is slowing back to target and the economy is losing momentum.
Banxico, as the central bank is known, lowered borrowing costs by a quarter-point to 10% in a unanimous decision. The move was forecast by 21 of 29 economists surveyed by Bloomberg. The remaining eight predicted that the bank would accelerate the pace of easing with a half-point cut.
“The Board expects that the inflationary environment will allow further reference rate reductions,” policymakers wrote in a statement accompanying their decision. “In view of the progress on disinflation, larger downward adjustments could be considered in some meetings, albeit maintaining a restrictive stance.”
Governor Victoria Rodriquez and colleagues last month looked past a number of risks including a slight uptick in inflation and output to unanimously vote to continue easing. Less than a month later, signs of slowing growth abound while both headline inflation and core readings are decelerating, though incoming US President Donald Trump and a more cautious Federal Reserve cloud the outlook.
“Banxico decided for a quarter-point cut to maintain its smooth implementation of the easing cycle, while there are still significant risks ahead, including the new US administration and a shallower easing by the US Fed,” Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc., said by text before the decision.
The bank said the possibility of new tariffs on US imports from Mexico, as Trump has pledged to impose, added uncertainty to its inflation forecast, which was revised upward starting in the second quarter of next year. Banxico now sees inflation converging to the 3% target in the third quarter of 2026 from the fourth quarter of 2025 previously. The balance of risks for inflation remained tilted to the upside, the bank added.
“Due to the risks related to the US incoming administration in the first quarter of 2025, it may be difficult for the central bank to become more aggressive in the short term. However, the communication left the door wide open so if coming data allows a faster pace, they will deliver,” said Claudia Ceja, a strategist at BBVA Mexico.
The Mexican peso shook off losses and climbed to a session high after Banxico delivered the cut, upending some bets that policymakers could have picked up the pace of easing.
With information from El Financiero
TYT Newsroom
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