Mexico Cuts Key Interest Rate for the First Time Since 2021

• Mexico’s central bank (Banxico) cut interest rates in a split decision, joining regional peers that have been easing monetary policy as inflation slows.
• Banxico, on Thursday cut its benchmark rate by a quarter point to 11%, as forecast by 26 of 29 economists surveyed by Bloomberg. Three analysts expected the bank to keep the key rate unchanged.
• Notably, deputy governor Irene Espinosa voted to leave the rate unchanged, while the other four board members all backed the reduction, the bank said in its policy statement.
• Future decisions “will take into account the progress in the inflation outlook and the challenges that prevail,” the bank said. “It will also consider the incidence of both the restrictive policy stance that has been maintained and that prevailing in the future on inflation throughout the horizon in which monetary policy operates.”
• Consumer prices rose 4.4% in February from the previous year, down from 4.88% a month earlier and roughly half the peak of 2022. Core inflation, which strips out volatile items like fuel and is closely watched in Mexico, also came down to 4.64% last month. Banxico targets inflation at 3%, plus or minus 1 percentage point.
• The latest Citibanamex survey published Wednesday shows economists see both headline and core inflation slowing to 4.1% this year, before reaching 3.71% and 3.69%, respectively, in 2025. They also forecast the key rate to fall to 9.5% this year and 7.5% by the end of 2025.

(Source: Bloomberg)