Mexico | Banxico adopts cautious tone as remaining easing room narrows

Summary

We enter a new data-dependent phase in which the Board monitors core inflation before signaling it may lower the ex-ante real policy rate close to the 2.7% midpoint of its estimated neutral range.

Key points

• Key points:
• Banxico delivered a widely expected 25bp rate cut, bringing the policy rate to 7.25%, with the tone of the policy statement turning slightly less dovish.
• It made moderate changes to its inflation projections, keeping headline forecasts nearly unchanged while revising core inflation slightly higher through mid-2026.
• Banxico signaled that the easing cycle now has less room to run after bringing the policy stance into the neutral range after a long-lasting overly restrictive phase.
• We expect Banxico to proceed with another 25bp cut at its December meeting, to 7.00%, and to deliver two additional 25bp cuts in 2026.
• Yet, following today’s forward guidance change and our expectation of inflation staying above Banxico’s path, we think a pause of the easing cycle in 1Q26 is likely.

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