Mexico | Banxico’s unchanged guidance signals more rate cuts ahead

Summary

The absence of new language suggesting increased caution—despite recent core inflation stickiness—indicates that most members remain open to continuing the easing cycle, albeit at the current more gradual pace of 25 bps per meeting.

Key points

• Key points:
• Banxico cut the policy rate by 25bp to 7.75%, as widely expected. The decision was not unanimous: Jonathan Heath dissented once again, preferring to hold.
• The inflation outlook was mostly unchanged, suggesting a low risk that Banxico will pause its rate-cutting cycle at the next meeting.
• This suggests that recent core inflation dynamics have not been disappointing enough to shake the Board’s confidence in continued core services disinflation.
• The forward guidance retained the strategic ambiguity introduced in June, reinforcing a data-dependent approach, with no explicit preference for the next move.
• We continue to expect Banxico to deliver three additional 25bp rate cuts this year, bringing the policy rate down to 7.00% by year-end.

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