Last week, official data was released showing a significant quarterly decline in the Mexican economy in the last three months of 2024. This contraction was due to weakness in domestic demand and private investment, as well as rising tensions with its main trading partner. In response, the Bank of Mexico reduced its GDP growth forecast for 2025 to 0.6 percent, down from the previous forecast of 1.2 percent.
Annual inflation in Mexico has roughly followed the projections of economists in early February, maintaining the possibility of a sixth consecutive interest rate cut. Consumer prices rose in the first weeks of February, standing at 3.74 percent compared to the previous year, slightly below analysts' estimates. Core inflation, which excludes volatile items such as food and fuels, was at 3.63 percent.
The Bank of Mexico lowered the interest rate to 9.5 percent in early February and indicated that it may continue to adjust monetary policy in the future. A slowdown in private consumption and reduced investment is expected to lead to weaker growth. The risk balance for the inflation trajectory remains upward, primarily affected by changes in U.S. economic policies.
Despite the added uncertainty from the new U.S. administration, the Bank of Mexico will hold its next interest rate setting meeting on March 27. They maintain their growth projection for 2026 at 1.8 percent. In early February, the U.S. president agreed to delay tariffs on Mexican exports that he had previously announced.
