Banxico Cuts Benchmark Rate 25 bps to 7.50%

Mexico’s Central Bank (Banxico) cut its benchmark interest rate by 25 basis points to 7.50% in a majority decision, continuing the monetary easing cycle that began in March 2024.

Deputy Governor Jonathan Heath cast the sole dissenting vote, maintaining his long-standing opposition to further policy loosening.

The move, widely anticipated by markets, marks the 10th reduction in the current cycle. Banxico said it will continue to evaluate additional cuts based on inflation trends and external conditions.

“Going forward, the Board will assess further reductions to the reference rate. Actions will ensure that the rate remains aligned with the path needed to bring headline inflation to the 3% target,” the bank said, projecting convergence by the third quarter of next year.

Upcoming monetary policy announcements are scheduled for Nov. 6 and Dec. 18.

Banxico noted that the decision was supported by recent inflation trends. Core inflation is expected to see a modest uptick in the second half of 2025, while headline inflation is projected to converge to the 3% target within the stated timeframe.

From December 2023 to August 2024, inflation in services remained between 4.44% and 4.94%, while general inflation fluctuated between 3.57% and 3.59%, peaking above 4% in May and June.

The bank highlighted risks to inflation, including peso depreciation, global geopolitical tensions, trade policy changes, persistent core inflation, higher costs, and weather-related disruptions. On the upside, slower economic activity, weaker cost pass-through, and peso appreciation could ease price pressures.