The Bank of Mexico’s key interest rate will fall to 8.50% after the central bank’s governing board unanimously supported a third successive 50-basis-point cut on Thursday.
The five members of the board voted in favor of the cut despite an uptick in inflation in April.
With the annual headline inflation rate still within the Bank of Mexico’s 2%-4% target range, the market was anticipating the board’s latest decision.
The 8.50% benchmark rate — the lowest rate in almost three years — will take effect this Friday. The latest cut comes after 50-basis-point reductions in February and March.
The Bank of Mexico (Banxico) said in a statement that the governing board “took into account the behavior of the [USD:MXN] exchange rate, the weakness of economic activity and the possible impact of changes in trade policies worldwide” when assessing whether to adjust the benchmark interest rate.
“Considering the current inflationary outlook and the prevailing level of monetary restriction, with the presence of all its members, the Board decided unanimously to lower the target for the overnight interbank interest rate by 50 basis points to 8.50%,” Banxico said.
Con la presencia de todos sus miembros, la Junta de Gobierno del #BancodeMéxico decidió por unanimidad disminuir la Tasa de Interés Interbancaria a 1 día, a un nivel de 8.50% con efectos a partir del 16 de mayo de 2025. Consulta el comunicado en: https://t.co/5I8HUr8Svr pic.twitter.com/kQMEOXezi4
— Banco de México (@Banxico) May 15, 2025
The central bank indicated that additional 50-basis-point cuts are likely.
“The Board estimates that looking ahead it could continue calibrating the monetary policy stance and consider adjusting it in similar magnitudes. It anticipates that the inflationary environment will allow to continue the rate cutting cycle, albeit maintaining a restrictive stance,” Banxico said.
The governing board’s next monetary policy meeting is scheduled for June 26.
Banxico’s key interest rate was held at a record high of 11% for a full year before an easing cycle began in March 2024 with a 25-basis-point cut. Mexico’s annual headline inflation rate rose to a two-decade high of 8.7% in the second half of 2022.
The annual headline rate was 3.93% in April, up from 3.80% in March and 3.77% in February. Banxico targets 3% inflation, but considers any rate between 2% and 4% to be within its acceptable range.
The outlook for inflation
Banxico forecasts that the headline inflation rate will fall to 3.5% in the third quarter of 2025 before declining to 3.3% in Q4.
The central bank predicts that inflation will continue to fall in 2026 to reach 3% in the third quarter of next year.
Banxico’s outlook extends to the first quarter of 2027, at which point it forecasts that annual headline inflation will still be at the 3% target rate.
Peso closes at 19.50 the dollar
After closing at 19.38 to the dollar on Wednesday, the peso depreciated on Thursday ahead of Banxico’s interest rate announcement.
The Bank of Mexico’s closing USD:MXN rate on Thursday was 19.50.
The peso on Wednesday reached its strongest position since October, the month President Claudia Sheinbaum took office.
The currency has performed well this year after depreciating significantly in 2024 due to a range of factors including the ruling Morena party’s comprehensive victory in Mexico’s 2024 elections last June, Congress’ approval of a controversial judicial reform and Donald Trump’s victory in the U.S. presidential election last November.
Since Trump took office, the peso has appreciated 6.5% against the greenback, despite the U.S. president imposing tariffs on a range of Mexican goods, including steel, aluminum, vehicles and products not covered by the USMCA free trade pact.
Mexico News Daily
