The Bank of Mexico (Banxico) announced a 25-basis-point cut to its key interest rate on Thursday, marking the fourth time that borrowing costs have been reduced this year.
The central bank’s benchmark rate will thus be 10.25% once the latest reduction takes effect on Friday.
Banxico’s announcement came after its governing board held a monetary policy meeting on Thursday. Governor Victoria Rodríguez Ceja and all four deputy governors voted in favor of a 25-basis-point cut a week after the United States Federal Reserve lowered its federal funds rate by the same margin to a range of 4.50%-4.75%.
In a statement, Banxico noted that annual headline inflation “rebounded” to 4.76% in October, but highlighted that the core rate, which it said “better reflects inflation’s trend, continued decreasing and registered 3.80%.”
The central bank targets 3% inflation but tolerates a 2–4% range.
Banxico also said that “the inflation outlook has been improving after the significant shocks caused by the pandemic and the war in Ukraine.”
“The behavior of core inflation” – which declined for a 21st consecutive month in October – “reflects this improvement,” Banxico said.
The central bank’s governing board also voted in favor of 25-basis-point interest rate cuts at its monetary policy meetings in March, August and September.
Before the cut in March, Banxico’s key interest rate was set at a record high 11.25%, rising to that level in March 2023 at the end of a 21-month tightening cycle during which a total of 15 hikes — totaling 725 basis points — were made in an attempt to combat high inflation.
In its latest statement, the central bank said that “looking ahead,” the governing board “expects that the inflationary environment will allow further reference rate adjustments.”
“… Actions will be implemented in such a way that the reference rate remains consistent at all times with the trajectory needed to enable an orderly and sustained convergence of headline inflation to the 3% target during the forecast period,” Banxico said.
The bank anticipates that annual headline inflation will decline to 3.9% in the first quarter of next year and continue to fall to reach 3.4% in Q2 of 2025, 3.1% in Q3 and 3% in Q4.
Mexico News Daily
Source: Mexico News Daily
