The Bank of Mexico (Banxico) announced another cut to the interest rate by 25%, placing it at 7.25%, in another divided vote. This decision was made primarily considering the cooling of the Mexican economy, following the GDP contraction in the third quarter by 0.3% year-over-year and quarter-over-quarter, according to data from INEGI. In its statement, the central bank justified the cut: 'in line with the assessment of the current inflationary outlook.' Despite this, in its statement, Banxico reaffirmed the estimate that general inflation will stand at 3% by the end of 2026, however, they acknowledged that the balance of risks maintains an upward bias. On its forward guidance, the central bank indicated that 'going forward, the Governing Board will evaluate cutting the benchmark rate.' Despite the persistent pressures on inflation, Banxico's Governing Board announced another cut to the interest rate by 25%, which places it at 7.25%, in another divided vote. The team led by Victoria RodrÃguez considered mainly the cooling of the Mexican economy, after the GDP contraction in the third quarter by 0.3% year-over-year and quarter-over-quarter, according to INEGI data. In its statement, the central bank justified the cut: 'in line with the assessment of the current inflationary outlook.' This is a significant modification that would indicate either the intention to pause in February, or that the possible cut in December would end the cycle,' analysts at XP Research noted. Despite the persistent alerts on underlying inflation, the market is preparing for more cuts at Banxico. According to the Citi consensus among economic specialists, published a day before the monetary policy announcement, the interest rate is expected to close the year at 7%, which would imply another cut. According to analyst Gabriela Siller, with the cut announced this afternoon, the interest rate is now in the neutral range at Banxico, meaning it neither stimulates nor restricts economic activity. 'It will take into account the effects of all the determinants of inflation,' this results in a slight change from its previous comments when it talked about cuts, in plural, which some analysts have already interpreted as that they are close to ending the rate-cutting cycle. 'By maintaining a neutral stance, monetary policy would not be fighting inflationary pressures,' she warns. In particular, it considered the behavior of the exchange rate, the weakness that economic activity has shown, and the possible impacts from changes in global trade policies.' The vote was again divided by the dissenting vote of Deputy Governor Jonathan Heath, who voted in favor of pausing the rate-cutting cycle.
