Jun 10, 2025
MEXICO CITY – Mexico’s central bank is anticipated to reduce its key interest rate by another 50 basis points this month, despite a recent surge in inflation. Analysts, however, suggest that the pace of rate cuts may slow if inflation rates stabilize. For more details, you can read the full article on Yahoo Finance.
In May, inflation in Mexico surpassed the central bank’s target of 3%, plus or minus a percentage point, with the headline rate accelerating to 4.42%, the highest since November. Core inflation rose to 4.06%, marking its peak in nearly a year. Despite these figures, a dozen economists surveyed by Reuters expect the Bank of Mexico to proceed with its fourth consecutive rate cut of 50 basis points at its upcoming meeting on June 26.
According to IndexBox data, the Mexican economy, Latin America’s second-largest, narrowly avoided a technical recession in the first quarter. However, it still encounters significant risks due to weak domestic activity and uncertainty surrounding U.S. trade policies. The central bank recently revised its 2025 growth forecast for gross domestic product to a mere 0.1% from a previous estimate of 0.6%, which would represent its weakest performance since the pandemic.
Experts like Julio Ruiz, chief economist for Mexico at Citi, hold that the current level of monetary restriction is excessive relative to the inflation rate. Gabriela Siller, head of analysis at Banco Base, suggests that while a 50 basis point cut is expected, a more prudent approach would be to pause the monetary easing cycle initiated in early 2024 after rates hit a record high of 11.25%.
Ramse Gutierrez, co-director of investments at Franklin Templeton, anticipates a more cautious approach from the Bank of Mexico in future rate cuts, emphasizing the importance of moderation in the bank’s statements. Barclays also echoed this sentiment, indicating that growth will remain a primary driver of monetary policy, with the central bank having room to ease monetary conditions further.