Mexico | Banxico opens the door to a 50bp rate cut at the next meeting

Summary

However, we think that the best timing to cut the policy rate by 50 bps was today, since the window will likely close early next year if Trump imposes tariffs and a context of global risk aversion hits the peso, turning Banxico even more cautious.

Key points

• Key points:
• Board members voted unanimously to cut the policy rate by 25 bps to 10.0%, bringing the ex-ante real rate down to ~6.1% from the 7.4% peak reached earlier this year.
• Banxico revised up both its headline and core inflation forecasts for next year and now expects them to hit the 3.0% target until 3Q26 and 2Q26 (vs. 4Q25 previously).
• The statement’s forward guidance signals that a string of consecutive rate cuts is set to continue ahead and opens the door for considering larger cuts at “some meetings.”
• The risks to our end-2025 8.00% below-consensus forecast for the policy rate could even lie to the downside, not to the upside, if tariff risks materialize.
• They would hit economic activity and the effect of an exchange-rate pass-through would be more than offset by weaker demand amid easing core inflation.

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