Mexico’s central bank cuts interest rate by 25 basis points to 7.5%

Investing.com -- Mexico’s central bank lowered its benchmark interest rate by 25 basis points to 7.5% on Thursday, in line with economist expectations.

The rate cut, which takes effect Friday, was approved by a majority of Banco de Mexico’s Governing Board, with four members voting in favor and one member, Jonathan Heath, preferring to maintain the rate at 7.75%.

In its policy statement, the central bank noted that global economic activity expanded at a slower pace in the third quarter of 2025 compared to the previous quarter. The bank cited ongoing trade tensions that are expected to cause economic deceleration both globally and in the United States this year and into 2026.

The decision follows the Federal Reserve’s recent 25 basis point rate cut, with more reductions anticipated before year-end. This move has contributed to lower U.S. government interest rates, particularly in the short term, and a slight depreciation of the U.S. dollar.

Mexico’s economy showed signs of sluggishness at the start of the third quarter, while the peso has appreciated since the previous monetary policy meeting. Mexican government interest rates, especially longer-term ones, have decreased during this period.

Inflation data showed headline inflation increased slightly from 3.51% to 3.74% between July and the first half of September, while core inflation moved marginally from 4.23% to 4.26%. The central bank still expects headline inflation to reach its 3% target by the third quarter of 2026.

The bank identified several upside risks to inflation, including potential peso depreciation, trade policy disruptions, persistent core inflation, cost pressures, and climate-related impacts. Downside risks include weaker-than-expected economic activity and lower cost pass-through.

The Governing Board indicated it would continue to assess further rate adjustments based on inflation determinants, maintaining its commitment to achieving low and stable inflation.