Mexico's Central Bank Raises Prospects of Larger Interest Rate Cuts Amid Slowing Inflation
Mexico's central bank (Banxico) has indicated the potential for more substantial interest rate reductions at its initial monetary policy meetings this year, citing a decline in inflation.
Banxico released its 2025 monetary program report, suggesting that despite anticipated rate cuts, monetary policy would remain restrictive throughout the year. The bank noted that while headline inflation eased to 3.69% in early January, upside risks to inflation persist, primarily due to persistent core inflation.
The bank's dovish stance is supported by a projected moderate economic growth rate of 1.2% for Mexico in 2025. However, it acknowledges downside risks and uncertainty stemming from the potential policies of the incoming Trump administration.
Banxico emphasized the potential impact of trade and financial policy changes on Mexico's macroeconomic fundamentals, given the close economic ties between the two countries. The bank noted that Trump's threat to impose tariffs on Mexico could have repercussions.
Despite these concerns, Mexican President Claudia Sheinbaum expressed confidence in maintaining a positive relationship with the United States, Mexico's largest trade partner.