Mexico | Banxico delivers final cut, reinforces prolonged pause

Summary

Looking further ahead, as core inflation converges toward 3.5% in 2027 and the Fed potentially resumes easing, Banxico could consider additional rate cuts, bringing the policy rate closer to 6.0%.

Key points

• Key points:
• Banxico cut the policy rate by 25 bps to 6.50% and confirmed the end of the easing cycle, although the decision once again revealed a divided Board.
• The Board’s inflation assessment suggests that policymakers continue to view recent price pressures as largely temporary and supply-driven.
• The wording of the policy statement explicitly notes that the continued weakness in economic activity “implies an absence of demand pressures in the economy.”
• The easing bias of the forward guidance was dropped, though, reflecting the view that the environment of elevated global uncertainty calls for caution.
• The statement explicitly noted the Board’s decision to “conclude the cycle” and that “it will be appropriate to maintain the reference rate at its current level.”

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