BofA update shows where active managers are putting money
Investing.com -- Mexico’s central bank (Banxico) reduced its policy rate by 25 basis points to 7.75% on Friday, slowing the pace of monetary easing after four consecutive 50 basis point cuts.
The decision, which was widely anticipated by analysts, came with a split vote of 4-1, with Deputy Governor Jonathan Heath voting to keep rates unchanged. Heath has maintained a hawkish stance, having also voted against a rate cut at the previous meeting.
In its statement, Banxico acknowledged the recent decline in inflation to 3.5% year-over-year in August, alongside a small rise in core inflation. Despite these developments, the central bank’s inflation forecasts remained largely unchanged.
The bank noted that while second-quarter GDP growth exceeded expectations at 0.7% quarter-over-quarter, there is still economic slack and significant downside risks to growth.
The forward guidance in the statement suggested that the easing cycle will continue, with policymakers planning to "assess further adjustments to the reference rate" in upcoming meetings.
Capital Economics believes the inflation environment supports further rate cuts, maintaining their forecast for the policy rate to end 2025 at 7.00%. However, they noted that with the Mexican economy showing surprising resilience in the face of tariffs, risks to their rate forecast are tilted to the upside.
The slower pace of easing had been signaled at the previous meeting when Banxico dropped guidance about lowering rates "in similar magnitudes," with meeting minutes revealing that most policymakers favored continuing easing at a reduced pace.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.