Mexico's Central Bank Signals Further Rate Cuts as Inflation Eases
Mexico's inflationary environment is enabling policymakers to continue reducing the benchmark interest rate, stated the head of the Bank of Mexico. This follows the central bank's latest 50-basis-point cut to 9.50%, double the previous 25-basis-point reductions since the initiation of easing in March 2024.
"The battle against inflation has entered a new era," said Banxico Governor Victoria Rodriguez.
The recent rate decrease marked the lowest level for Mexican interest rates since September 2022, coinciding with a slowdown in annual inflation to 3.69% in early January. This represents the lowest headline inflation since early 2021 and falls within the central bank's target of 3%, plus or minus one percentage point.
"Lower [interest] rates are needed to tackle this new stage," Rodriguez emphasized.
Mexico's economy has experienced volatility due to the threat of U.S. tariffs on Mexican exports, despite the suspension of these measures until March 1.
"We are confident in the cooperation and long-term solutions from both countries' authorities, while remaining attentive to any developments in March," said Rodriguez.
Analysts warn that potential tariffs could lead to recession and "stagflation" in Mexico.
Rodriguez indicated that Banxico could intervene to maintain the orderly functioning of financial markets, highlighting the significance of trade relations between the two nations.
"Trade integration and Mexico's involvement in U.S. production chains have fostered growth, offering competitive prices for U.S. consumers," Rodriguez noted.