Mexico's central bank lowered its target interest rate by a quarter of a percentage point to 7.75pc, its lowest since June 2022, signaling a slower pace to the current rate cut cycle on inflation concerns.
The central bank move Thursday marked the fifth rate cut of 2025, and the first quarter-point cut after four consecutive half-point reductions. This year's cuts follow five quarter point cuts last year from a cyclical peak of 11.25pc in March 2024.
In its rationale, the board said it based the decision on "the behavior of the exchange rate, the weakness of economic activity, and the possible impact of changes in trade policies worldwide," maintaining language used in the prior decision on 26 June.
For a second occasion, the decision was not unanimous, going 4-1, with deputy governor Jonathan Heath voting to hold the rate unchanged.
"Looking ahead, the board will assess further adjustments to the reference rate," policymakers said in their statement. Mexican bank Banorte said the language of the statement suggests continuation of the smaller rate cuts.
Banorte forecasts a 25-basis-point rate cut at the 25 September central bank meeting, with two more likely quarter point cuts taking the target rate to 7pc by the end of the year.
Earlier Thursday, statistics agency Inegi reported inflation slowed to an annual 3.51pc in July, from 4.32pc in June, marking the lowest annual headline inflation rate since December 2020.
The central bank's headline inflation estimates, included with the decision, were largely unchanged with end-2025 consumer price index (CPI) held unchanged at 3.7pc, though the board adjusted the third quarter 2025 estimate to 3.8pc from 4.1pc in the previous estimate.
However, the bank's end-2025 core estimate, which excludes volatile food and energy prices, moved to 3.7pc from 3.6pc previously.
