Bank of Mexico May Consider Larger Rate Cuts, According to Bank Governor – Reuters

By Anthony Esposito

MEXICO CITY – The governing board of the Bank of Mexico may consider more significant reductions to its benchmark interest rate in the future as inflation decreases in Latin America’s second-largest economy, according to bank governor Victoria Rodriguez in a recent interview.

Banxico, as the Mexican central bank is known, lowered its key interest rate by 25 basis points to 10.50% on Thursday, marking the second consecutive cut as price pressures ease. A prior reduction of a quarter percentage point occurred in March.

"We could evaluate the size of the adjustments to the reference interest rate at our upcoming meetings, taking into account the inflation levels that we have been observing," Rodriguez stated.

Banxico will announce its next monetary policy decisions on November 14 and December 19.

It is worth noting that the recent rate cut approved by Banxico’s five-member governing board was not unanimous, with Deputy Governor Jonathan Heath voting to keep the rate at 10.75%.

According to official data released on Tuesday, Mexico’s annual headline inflation decreased to 4.66% in the first half of September, marking its fourth consecutive fortnight of decline. Core inflation also eased to 3.95%, the lowest level since early 2021.

"The adjustment to the inflation outlook suggests that it is appropriate to lower the level of restrictive monetary policy, although we also acknowledge that challenges remain," Rodriguez remarked.

Last week, Banxico slightly revised its forecast for annual headline inflation in the fourth quarter down to 4.3%, from an earlier prediction of 4.4%, and adjusted its projection for core inflation to 3.8% from 3.9%.

"The inflation outlook has shown significant improvement," the Mexican central banker observed.

Incoming Mexican President Claudia Sheinbaum will take office on Tuesday, and Rodriguez believes the country’s first female president will inherit the economy in a "solid position."

Rodriguez emphasized that Mexico has sustainable external accounts, a moderate current account deficit, a resilient banking system, and adequate levels of international reserves.