The Bank of Mexico (Banxico) stepped up its pace and reduced the reference rate by 50 basis points in a recent meeting, bringing it to 9.50 percent, a measure that had not been taken since August 2020. During the Chapultepec Conference organized by the Bank for International Settlements (BIS), Banxico indicated that they will remain attentive to current challenges at upcoming meetings, considering factors such as the fading of global shocks and the rise in inflation.
Regarding the uncertainty about the possible measures of the new U.S. administration and its impact on Mexico, it is suggested that they could be negative, particularly concerning inflation and economic weakness against the backdrop of exchange rate depreciation.
Analysts estimate that Banxico's cut will generate another downward adjustment of 50 basis points in March, although there are risks. There are concerns about economic weakness, exchange rate depreciation, wage pressures, and trade tensions, as well as the prospect of minimal cuts by the U.S. Federal Reserve and uncertainty in global trade policy.
Governor Victoria Rodríguez suggests that there are possibilities for further cuts in the interest rate throughout the year, considering factors such as economic weakness and the restrictive monetary stance. In this decision, the vote in favor of the cut included Governor Victoria Rodríguez and deputy governors Galia Borja, Omar Mejía, and Gabriel Cuadra.
Banxico maintains the expectation that overall inflation will converge to the target in the third quarter of 2026. Further downward adjustments to the reference rate are not ruled out, maintaining a restrictive stance to facilitate the orderly and sustained convergence of inflation to 3.0 percent. Among the identified risks for inflation are factors such as exchange rate depreciation, geopolitical conflicts, and trade policies.
The Bank of Mexico will continue recalibrating its monetary stance and does not rule out another similar adjustment in the future. In its first monetary policy announcement of the year, Banxico recognized significant progress in resolving inflationary episodes derived from global shocks, which required a reduction in reference rate levels.
