Mexico’s central bank may cut interest rates up to 50 basis points at its next meeting, continuing an easing cycle initiated this year as inflation began to slow, according to a deputy governor at the Bank of Mexico.

Deputy Governor Jonathan Heath told reporters this week that growing uncertainty with regard to U.S. trade, in conjunction with ratings agencies’ outlooks and Mexico’s economic prospects at the time of the Feb. 6 meeting, will influence the final decision.

“If Trump doesn’t announce a major disruption (in his inauguration speech) on Jan. 20, if inflation is in line with projections and as long as there’s no unanticipated shock, discussion prior to the February decision could be between cutting the benchmark rate by 25 to 50 basis points,” Heath said in a written response to questions on Monday.

The central bank lowered its benchmark interest rate by 25 basis points five times in 2024, but said after its last meeting on Dec. 19 — in which it reduced the rate to 10% — that it was open to larger cuts.

“In view of the progress on disinflation, larger downward adjustments could be considered in some meetings, albeit maintaining a restrictive stance,” the bank said in a post-meeting statement, according to the news agency Reuters.

The statement also referenced the Mexican peso’s volatility amid “the possibility of measures that could weaken integration with our main trading partner.”

Heath mentioned the possibility of tariffs on U.S. imports from Mexico as one cause of uncertainty. U.S. President-elect Donald Trump threatened to levy a 25% tariff on goods from Mexico if more action is not taken to curb the flow of drugs and migrants into the United States, and Mexico’s President Claudia Sheinbaum responded that she would impose reciprocal tariffs.

Economic growth is another concern. Analysts polled by the central bank expect the Mexican economy to grow just 1.12% in 2025, from around 1.6% this year, Reuters reported.

In the face of this uncertainty, Heath said it is “reasonable” to speculate that the benchmark interest rate will end 2025 between 8% and 8.5%, a real possibility if aggressive action is taken at the bank’s February meeting.

Though a 50-basis-point cut is possible at the next meeting, any decision by the central bank board is unlikely to be unanimous, Heath said, as other deputy governors differ on the speed and size of rate cuts to bring inflation back within its 3% target.

The 25-basis-point cut at the December meeting was unanimous, but Heath himself was the sole dissident during the bank’s September meeting at which the other five board members moved to cut the rate to 10.50%.

Heath, in an early October podcast with bank Banorte, said that even though core inflation is inching toward its target, the need to keep rates high still persisted.

As it is, the bank projects that headline inflation will fall to 3.8% by the end of next year, slowing from the 4.6% projected at the end of this month.

Looking ahead, Heath said this week that if Mexico is not hit with any negative shocks, inflation should come to within 3% by the third quarter of 2026.

With reports from Reuters, El Financiero and El Economista