Mexico Central Bank Cuts Interest Rate but Flags Trade Tensions and Weak Economy

• The Bank of Mexico lowered its benchmark interest rate by 50 basis points for the third consecutive meeting on Thursday, as inflation remains within the bank's target range, but uncertainty persists around trade tensions and a weak economy.
• The unanimous decision by the bank's governing board, which was expected by analysts polled by Reuters, brings Mexico's benchmark rate to 8.50%, its lowest level since August 2022.
• In a statement announcing the decision, the Mexican monetary authority said it could consider cutting the rate by a similar magnitude at future meetings. The decision comes days after official data showed headline inflation in Latin America's no. 2 economy hit 3.93% on an annual basis in April, accelerating from the previous month but still within the central bank's target range. Banxico, as Mexico's central bank is known, targets inflation at 3%, plus or minus a percentage point.
• The bank said its board considered Mexico's weak economic activity, "as well as the possible changes in trade policies worldwide." Banxico upheld its expectation that inflation will converge to its 3% target in the third quarter of 2026, but flagged risks from trade tensions with the United States, its top trading partner.

(Source: Reuters)