By Gabriel Burin
(Reuters) – The Bank of Mexico will likely cut its benchmark interest rate by 50 basis points at its meeting on May 15, taking it to 8.5%, according to a Reuters poll on Monday, as inflation remains near target and worries linger over weak economic activity.
Of 31 economists surveyed, 30 expect the central bank to deliver its third consecutive cut of 50 basis points, after cutting by that margin in February and March.
The outlier projected the bank would keep the rate at its current level, in light of the U.S. Federal Reserve’s warning last week of higher inflation and unemployment due to President Donald Trump’s tariff policies.
At the last monetary policy meeting, Banxico, as Mexico’s central bank is known, said it could consider further significant rate adjustments in its subsequent decisions if the inflation outlook allows.
Since hitting a more than two-decade high of 8.7% in 2022, Mexico’s annual inflation rate has fallen to within Banxico’s target range of 3%, plus or minus a percentage point.
Inflation rose to 3.93% in the 12 months through April, but still within the target range.
Analysts noted that members of the governing board have recently been emphasizing their concerns about weakening economic activity.
Although growth is not part of the central bank’s mandate, a weaker outlook is seen adding pressure on the governing board to continue reducing borrowing costs.
“Current inflation and the economic outlook should allow Banxico to continue monetary easing at the same 50 bp pace as the first two rate cuts this year,” Barclays said. “Furthermore, we believe the decision on a 50 bp cut will be unanimous.”
Mexico’s gross domestic product expanded just 0.2% in the first quarter, avoiding a technical recession after GDP in the fourth quarter contracted for the first time in more than three years.
Analysts and officials have said the risks of another contraction remain.
Of 21 experts who shared forecasts for Banxico’s subsequent decisions, 19 foresee another rate cut at the bank’s June meeting, although they were divided on the magnitude. The two others said the next rate cut could come as late as August.
The key rate is expected to close the year at 7.75%, which would be its lowest level since mid-2022, according to the median of 23 forecasts received for the final quarter of 2025.
(Reporting by Gabriel Burin; Writing by Noe Torres; Editing by Andrea Ricci)
Comments