Central Bank decreases rates in November

Latest bank decision: At its meeting on 6 November, the Central Bank decided to lower the target for the overnight interbank interest rate by 25 basis points to 7.25%. The move brought the cumulative reduction since early 2024 to 400 basis points, though rates are still high by regional standards.

Soft GDP and inflation outlook underpin cut: A further rate cut was motivated by the weak outlook for economic activity, and the Bank’s belief that both headline and core inflation will converge to the center of the 2.0–4.0% target range in the coming quarters.

Central Bank to ease further: All panelists see more interest rate cuts by the end of next year, though future monetary easing will be more modest than it has been this year and last. U.S. trade policy towards Mexico is a key risk factor; additional U.S. trade restrictions could warrant additional monetary support.

Panelist insight: On the outlook, EIU analysts said: “For now we maintain our forecast that Banxico will reduce its policy rate by a total of 75 basis points to 6.5% during its next three meetings in December, February and March. This will mark the conclusion of the central bank’s easing cycle. However, we acknowledge that the more cautious November statement presents risks to our forecasts, raising the probability of a temporary pause during this period.” Meanwhile, BBVA analysts said: “We expect Banxico to proceed with another 25bp cut at its December meeting, to 7.00%, and to deliver two additional 25bp cuts in 2026. Yet, following today’s forward guidance change and our expectation of inflation staying above Banxico’s path, we think a pause of the easing cycle in 1Q26 is likely.”

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