Mexico | All members are now on board with the rate cut cycle

Summary

A majority will remain determined to continue the easing cycle over the coming months, but we now expect Banxico to lower the policy rate to 8.00% by the end of next year (up from our previous 7.50% forecast).

Key points

• Key points:
• Banxico lowered its policy rate by 25 bps for the third consecutive meeting, to 10.25%. The decision was unanimous this time, with Deputy Governor Heath joining the majority.
• It revised up its headline inflation forecasts for 4Q24 and 1H25, as we expected, and fine-tuned by -0.1 pp its core inflation forecast for 4Q24.
• The stronger-than-expected pace of economic activity in the third quarter does not seem to have affected the confidence of board members in the inflation outlook.
• Banxico left the door wide open to rate cuts in upcoming meetings and signaled that the cycle has legs in a backdrop of a lack of growth dynamism next year.
• However, we now think that it might be somewhat more cautious next year with the Fed probably halting its cycle sooner the potential imposition of US tariffs.

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