Mexico Interest Rate

The Bank of Mexico unanimously cut its benchmark rate by 25bps to 10% in December 2024, continuing its easing cycle as expected. This aligns with global disinflation trends, though inflation in major economies remains persistent, particularly in services. Domestically, economic activity rebounded in Q3 following prior weakness but is expected to soften into 2025, with employment decelerating and downside risks persisting. Inflation eased, with headline inflation falling to 4.55% in November from 4.76% in October, and core inflation declining from 3.80% to 3.58%. While core inflation reflects an ongoing downward trend, persistent inflation in services led Banxico to revise inflation forecasts slightly upward, with headline inflation now expected to converge to the 3% target by Q3 2026. The bank signaled further rate cuts may be appropriate, potentially of greater magnitude, depending on the disinflation pace and economic outlook.