Banxico Cuts Rate to 7.75% as Easing Pace Slows

Mexico’s Central Bank (Banxico) cut its benchmark interest rate by 25 basis points to 7.75%, slowing its monetary easing cycle and signaling caution amid persistent inflation risks and weak economic activity.

The decision, approved by a 4–1 vote, saw Deputy Governor Jonathan Heath favor holding the rate at 8%, while Governor Victoria Rodríguez Ceja and Deputy Governors Galia Borja, José Gabriel Cuadra García, and Omar Mejía Castelazo backed the cut.

This marks a shift from the bank’s previous four moves, each involving a 50-basis-point reduction, and was in line with market expectations, according to Citi’s latest survey.

In its statement, the board said it was appropriate to continue easing in line with its inflation outlook but noted the balance of risks remains tilted upward, albeit less than in 2021–2024.

Banxico revised its core inflation forecast upward for the next three quarters: Q3 to 4.1% from 3.8%, Q4 to 3.7% from 3.6%, and Q1 2026 to 3.5% from 3.4%. It still expects inflation to return to its 3% target by Q3 2025.

The bank cited a weak economy, exchange rate volatility, subdued activity, and global trade policy uncertainty as downside risks, along with lingering effects from past monetary tightening.

“Slack conditions persist due to the continued weakness in economic activity,” it said, warning that global trade tensions could deepen these risks.

The board will assess further cuts while monitoring inflation drivers. Banxico noted it is approaching a “neutral” real rate — estimated at 1.8%–3.6% — where policy neither stimulates nor restrains growth.