Mexico's central bank cut its benchmark interest rate by 25 basis points to 7pc, its lowest level since June 2022, maintaining a slower pace in the easing cycle on inflation concerns.
The decision marked the eighth rate cut this year and the fourth quarter-point reduction following four consecutive half-point cuts. This year's cuts follow five quarter-point cuts in 2024 from a cyclical peak of 11.25pc in March.
The board approved the cut in a 4-1 vote, with deputy governor Jonathan Heath dissenting in favor of holding the rate at 7.25pc. Heath has been the lone dissenter in the past five decisions, consistently urging greater caution.
The central bank said the decision reflected "the behavior of the exchange rate, the weakness of economic activity and the possible impact of changes in global trade policies," repeating language used in its last four statements.
Gabriela Siller, chief economist at Banco Base, pointed to a "significant change" in the bank's forward guidance, noting a shift toward a less dovish tone. The board said it "will consider when to make further adjustments" to the policy rate, replacing the "will consider cutting" language used in November.
Mexican bank Banorte also said the central bank struck a less dovish tone, pointing to a change in its forward guidance.
Annual inflation rose to 3.8pc in November from 3.57pc in October, according to statistics agency Inegi. Core inflation, which excludes volatile food and energy prices, accelerated to 4.43pc from 4.28pc.
The central bank now sees headline inflation ending 2025 at 3.7pc, up from 3.5pc in its November forecast, while core inflation is projected at 4.3pc, revised from 4.1pc. It also raised its headline and core forecasts for the first two quarters of 2026, while maintaining that both will converge to its 3pc target by the third quarter.
The bank said the revisions mainly reflect a "more gradual-than-expected" easing in services inflation, along with a smaller contribution from accelerating consumer goods prices.
The board also addressed recent tax reforms, which it expects will have a temporary and not necessarily proportional impact on prices, adding it will update its forecasts as it conducts a comprehensive assessment of the revised tax code's effects.
