The Bank of Mexico cuts its reference rate by 50 points

The Bank of Mexico ( Banxico ) lowered its interest rate to 8.5%, its seventh consecutive cut and the third by 50 basis points, considering that the "inflationary episode" is over, while global shocks are resolved and allow it to continue with a cycle of cuts.

In its announcement, within market expectations, the central bank argued that "going forward, it could continue to calibrate its monetary stance and consider adjusting it by a similar amount."

Banxico explained that the inflationary environment allows it to "continue the cycle of cuts to the reference rate"; although it assured that it will maintain "a restrictive stance."

The decision, approved unanimously, is the seventh consecutive cut since the meeting of March 21, 2024, when the Governing Board reduced the rate for the first time since March 2023 amid improved inflation expectations.

Analysts had expected this ruling from Banxico after it was reported last Thursday that Mexico's headline inflation rose to 3.93% annually in the second half of April, marking three months of increases.

The Governing Board reiterated that "the fight against inflation is at a stage where it will seek to reduce it from current levels, around its pre-pandemic historical averages, to the target of three percent."

The central bank maintained its forecast for average headline inflation of 3.3% for the final quarter of 2025 ; it warned that the balance of risks to the projected inflation path "remains biased to the upside," although "it has improved as global shocks have been resolved."

This was the third decision of the year by the Mexican central bank, which will announce its next monetary policy on June 26 .

EFE

They warn of obstacles in the national economy

Our country's central bank considers rising exchange rate depreciation , disruptions due to geopolitical conflicts or trade policies, persistent underlying inflation, cost pressures, and climate impacts to be risks to the Mexican economy.

Banxico acknowledged in this regard that, "given the trade tensions" caused by the tariff war initiated by US President Donald Trump, "the global economic outlook, and that of the United States in particular, has been revised downward."

What does lowering the interest rate entail?

A lower interest rate helps stimulate consumption and other productive activities , which tends to increase investment, key factors in these times marked by the threat of U.S. tariffs.

CT