For the 10th consecutive meeting, Mexico’s central bank (Banxico) lowered its benchmark interest rate on Thursday, reducing it by 25 basis points to its lowest level since May 2022.
In a 4–1 vote, Banxico’s monetary policy committee reduced the overnight interbank interest rate to 7.5%, following a rate cut of the same amount by the US Federal Reserve on Sept. 17.
The reduction was approved, Banxico noted, while “economic activity exhibited sluggishness at the beginning of the third quarter of 2025” amid ongoing concerns about global trade tensions.
Banxico faces the twin tasks of reducing inflation and stimulating the economy amid weak economic growth, while also factoring fluctuating global trade policies into the equation.
The concern is that while a monetary easing policy could spur the economy, it could also fuel inflation in Latin America’s second largest economy.
Headline inflation crept up to 3.57% in August from 3.51% in July and data released on Wednesday showed that annual core inflation — which has been rising in recent months — hit 4.26% in the first half of September.
Headline inflation — which also rose during the first two weeks of September — reflects price changes for all goods and services, while core inflation excludes volatile items like food and energy to show the underlying, longer-term inflation trend.
The news agency Reuters interpreted Thursday’s decision to reduce the interest rate by a quarter-point — instead of the half-point reduction that Banxico had decided on four times earlier this year — as an indication that the bank has “concerns about sticky inflation, particularly the closely-watched core index.”
Further demonstrating this concern in an updated inflation forecast released on Thursday, Banxico raised its estimate for year-end annual core inflation to 4.0% in the fourth quarter, up from its previous estimate of 3.7%.
While expressing unease that Banxico might be overlooking persistent core inflation pressures, Alberto Ramos, managing director at Goldman Sachs, said in a note to clients that he expects two more rate cuts of 25 basis points before the end of the year.
Gabriela Siller, head of analysis at Banco Base in Mexico City, concurred, saying in a post on X that “it is noteworthy that [Banxico’s] forward guidance remains unchanged, implying that the governing board remains open to further interest rate cuts.”
Banxico has two more meetings on its 2025 calendar (Nov. 6 and Dec. 18), which suggests the interest rate could finish the year at 7%.
With reports from El Financiero, Trading Economics and Reuters
