Mexico's central bank lowered its target interest rate by a quarter point to 7.5pc, its lowest since June 2022, maintaining a slower pace in the current rate cut cycle on inflation concerns.
This move marked the sixth rate cut of the year, and the second 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 monetary policy 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 prior decisions on 7 August and on 26 June.
Mexico's consumer price index (CPI) accelerated to an annual 3.57pc in August from 3.51pc in July, the lowest annual headline inflation rate since December 2020, as price disinflation in produce offset acceleration in consumer goods and services inflation.
Mexican bank Banorte said the language of the statement suggests continuation of the smaller rate cuts. "Looking ahead, the board will assess further adjustments to the reference rate."
As a result, Banorte continues to forecast quarter-point reductions in the reference rate with the central bank's 6 November and 18 December decisions, taking the rate to 7pc at the end of 2025.
Looking further ahead, Banorte reiterated its call for two more 25-basis-point cuts in the first quarter of 2026 to 6.5pc, "the level which we believe will prevail for the rest of 2026."
On 25 September, statistics agency Inegi reported modest acceleration in Mexico's CPI during the last half of August and first half of September as a base effect that has slowed inflation in recent months steadily fades.
The central bank's headline inflation estimates, updated with the decision, were largely unchanged from the 7 August estimates, maintaining CPI will reach the bank's target inflation rate of 3pc in the fourth quarter of 2026, though the board nudged lower its estimate for end-2025 CPI to 3.6pc from 3.7pc.
