Banxico Expected to Keep Easing, Hit 7% by Year-End: Citi

The average forecast from analysts surveyed by Citi anticipates that Mexico’s Central Bank (Banxico) will continue its rate-cutting cycle, lowering the benchmark rate to 7% by the end of this year. The easing cycle is expected to extend into 2026, with the rate reaching 6.50%.

These projections include an expected 25-basis-point cut in Thursday’s monetary policy decision. If this forecast holds, the benchmark rate would fall to 7.25%, marking the third consecutive quarter-point reduction and the 13th cut since March 2024.

Although the average projection suggests continued easing, analysts remain divided on whether Banxico’s Governing Board will pause the cycle to reassess inflationary pressures.

Of the 37 participants, only Barclays expects a pause in November, with rate cuts resuming in December. Meanwhile, analysts from Banca Mifel, Banco Base, HSBC, and Oxford Economics forecast a pause in December, projecting the rate will end 2025 at 7.25%.

Several analysts note that maintaining the nominal rate at 7.25% would effectively end the restrictive monetary stance that has lasted just over two years.

2026: Further Easing Anticipated

The consensus of analysts consulted by Citi points to continued easing through 2026, bringing the rate to 6.50%. However, 11 of the 37 analysts diverge from this view:

• Santander expects the rate to settle at 7%, implying only one cut next year.

• Invex, HSBC, Deloitte Econosignal, Banca Mifel, and BxMás forecast 6.75%.

• Citi, Epicurus Investments, Oxford Economics, and XP Investments project 6.25%.

• Bank of America remains the most dovish, forecasting 6%.
   

Inflation and GDP Outlook

Differences in interest rate projections stem mainly from varying inflation and growth expectations. For 2025, the average forecast for headline inflation eased slightly to 3.80%, while core inflation is projected at 4.20%.

For 2026, headline inflation expectations rose to 3.90%, with core inflation seen at 3.80%. Regarding economic growth, the consensus maintains the 2025 GDP forecast at 0.5%, with projections ranging from -0.1% to 0.7%. Analysts expect a modest rebound in 2026, with average growth projected at 1.4%.