Mexico’s central bank, known as Banxico, has reduced its benchmark interest rate by 50 basis points to 8.0%. This marks the fourth consecutive half-point cut, bringing rates to their lowest level in nearly three years.
The decision emerged from a split vote among the bank’s five-member board of governors. Four members supported the reduction, whereas Deputy Governor Jonathan Heath voted to maintain the previous 8.5% rate. Following this announcement, the Mexican peso showed a slight increase of about 0.2% against the US dollar.
Interestingly, the central bank’s recent statement did not include language about considering future interest rate cuts of “similar magnitudes,” which hints at a possible slowdown in the pace of reductions. Additionally, Banxico revised its forecast for year-end average headline inflation to 3.7%, up from a previous estimate of 3.3% in May.
Despite a slight cooling to 4.51% in early June, annual inflation in Mexico continues to be a concern, remaining above the central bank’s target. The bank now anticipates reaching its 3% target in the third quarter of 2026.
Economic analysts foresee a more cautious approach to monetary policy for the rest of 2025. Private sector forecasts suggest the benchmark rate might end the year at 7.5%. Banxico aims to balance inflation control with economic stimulus amidst moderate growth and ongoing uncertainties related to trade tensions.
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