Mexico Interest Rate

Banxico, as the Mexican central bank is known, lowered its key rate by half a percentage point to 9.00% in a decision announced on March 27, as inflation eased further and amid signs of continued economic weakness early this year. The release revealed that several board members now foresee a similar 50bps reduction at the May 9 meeting if disinflation persists, signaling a potential continuation of the easing cycle. However, the central bank remains cautious amid significant global uncertainties, notably escalating trade tensions and broader geopolitical risks that could either fuel inflation through currency depreciation or dampen growth due to increased economic slack. While progress towards the 3% inflation target has been notable, members stressed the importance of a flexible policy framework, one that allows for gradual adjustments in a "new stage" of monetary policy without jeopardizing financial stability, particularly given the current rate differential with the US Fed.