The Governing Board of the Bank of Mexico has decided to consecutively cut the reference interest rate since its meeting in August. This is the first cut made by Banxico to the interest rate since inflation rose to 4.76 percent in October, breaking its downward trend. Despite this, core inflation moderated to 3.80 percent year-on-year, its lowest level since December 2020.
The Governing Board assessed the behavior of inflation and its determinants, as well as inflation expectations. It estimates that the National Consumer Price Index will be at 4.7 percent in December, 40 basis points higher compared to the previous forecast. It also raised its forecasts for inflation in 2025.
The Bank of Mexico implemented its fourth cut of the year to the interest rate, leaving it at 10.25 percent. The Governing Board unanimously voted in favor of this decision, which differs from previous meetings that had dissenting votes. The institution considered the downward trajectory of the underlying component to take this measure.
Although a rebound in inflation is expected towards the end of the year, Banxico has decided to cut the interest rate, taking into account the nature of the shocks that have impacted the non-core component. It is anticipated that the effects on overall inflation will dissipate in the coming quarters, especially with the reduction of global shocks and the effects of weakness in economic activity.
