Higher Rates Drive Mexicans to Save More in Long-Term Instruments

Higher interest rates have led Mexican households and businesses to allocate more savings to long-term financial instruments, according to Galia Borja, Deputy Governor of Mexico’s Central Bank (Banxico). In a recent public statement, Borja highlighted this trend as a key transmission mechanism of the central bank’s restrictive monetary policy.

Savings in long-term instruments rose from an average of 1.9% of GDP between 2010 and 2019 to 3.1% of GDP by December 2024. Banxico data shows that the M2 monetary aggregate held by residents increased from MX$10.7 trillion in September 2021 to MX$15.4 trillion by March 2025, reflecting a 7% annual growth rate between March 2024 and March 2025, a period during which the central bank began cutting interest rates after a cycle of increases.

Borja emphasized the importance of understanding which groups contributed most to the rise in long-term savings. She noted that M2 data indicates a shift from highly liquid assets, such as cash and demand deposits, to longer-term instruments like government bonds (Cetes).

Luis Pérez Lezama, director of economic research, Saver, explained that the M2 includes long-term instruments such as promissory notes with yield at maturity and Cetes, some with residual maturities of up to five years. These instruments are offered by banks, credit unions, and investment funds.

Pérez Lezama also pointed out that the benefits of higher yields on investment assets  largely accrue to clients of mutual funds and do not necessarily translate into reduced consumption or lower inflation. He cited continued growth in the monetary base—which includes cash and demand deposits—as evidence of robust demand. As of May 23, Banxico reported the monetary base had reached MX$3.2 trillion.

The ongoing growth in cash usage, which began in April 2020, indicates that physical currency remains prevalent in consumer transactions, contributing to inflationary pressure.

While some officials argue that household savings are sufficient to weather an economic slowdown, Pérez Lezama cautioned that financial security is not evenly distributed. He noted that only 5% to 10% of the population invests in formal financial products.