Mexico | Banxico speeds up easing pace, strikes a more dovish tone

Summary

It unequivocally signaled that it remains set to keep cutting rates steadily ahead and hinted that in the absence of any major events, it is likely to consider additional 50bp cuts at upcoming meetings.

Key points

• Key points:
• Banxico lowered the policy rate by 50 bps to 9.50%, bringing the ex-ante real rate to 5.6%, 200 bps above Banxico’s own 3.6% upper-bound estimate for the neutral rate.
• The Board noted last weekend’s “significant depreciation” of the peso, but its attention seems to be more focused on "the weakness of the Mexican economy."
• Banxico left both its headline and core inflation forecasts broadly unchanged; it continues to expect inflation to fall below 3.5% in 3Q25 and to drop to 3.0% in 2026.
• The statement’s forward guidance signals a set of consecutive rate cuts ahead and keeps the door wide open for additional large cuts.
• Today’s larger cut supports our below-consensus 8.0% rate by the end of the year, but we now think there’s a bias towards more easing this year.

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