By Gabriel Burin
BUENOS AIRES, Dec 12 (Reuters) – Mexico’s central bank will lower its key interest rate to 7% at its meeting on December 18, according to a Reuters poll of economists who were almost evenly split on whether policymakers will follow through with another cut early next year.
It would be the 13th cut since February 2024, after the benchmark cost of borrowing hit a record 11.25%. Just over half of the analysts with a view into next year expect one or two more cuts by end-March, with the rest forecasting a pause in the long easing cycle.
They expect next week’s policy statement to reinforce a cautious tone as worries about soft economic conditions are offset by higher inflation risks amid a still uncertain trade outlook.
This would put the central bank, known as Banxico, on a similar track to the U.S. Federal Reserve, which cut interest rates this week but signaled the bar was high for further easing in the near term.
Banxico’s five-member board of governors is set to cut the benchmark rate by a quarter percentage point to 7.00% from 7.25% at Thursday’s meeting, according to all 29 economists polled December 8-11.
“Despite lingering (inflation) pressures, we still expect a 25bp cut,” said analysts at Morgan Stanley. “However, these pressures, January’s health-related taxes and potential tariff pass-through raise the likelihood of a February pause.”
Last month, Banxico trimmed its growth forecast for Mexico’s economy to near zero and maintained an estimate for a slow 1.1% expansion in 2026.
It also reiterated its view that inflation would hit the 3% target by the second half of next year but slightly raised forecasts for consumer price rises for some periods ahead.
The annual inflation rate accelerated more than expected in November to 3.80%, with one of the central bank’s board members warning of additional risks for the coming year.
Another policymaker, Jonathan Heath, has been more vocal, saying Banxico’s forecasts faced a “credibility crisis” given the implausibility of reaching the 3% inflation goal in just a few months’ time.
Of the 21 poll participants who gave quarterly forecasts, 10 saw Banxico holding the rate at 7.00% through the January-March period, while seven saw it falling to 6.50% and four to 6.75%, for a median estimate of 6.75%.
This contrasted with November’s poll when seven of 19 economists forecast the bank would hold or raise rates in the first quarter, from 7.00% in December 2025, with a consensus estimate of 6.75% as well.
In the latest survey, of 21 economists who answered an extra question on the bank’s next move after this month’s decision, nine saw a cut in February, two in March, and the other 10 in different months of 2026.
“For 2026, we expect Banxico to pause in the first quarter to analyze price pressures stemming from the imposition of tariffs and taxes,” said Ivan Arias, an economist at Banamex. “Then resume easing with a couple of cuts in May and June to reach a terminal rate of 6.50%.”
(Other stories from the Reuters global economic poll)
(Reporting and polling by Gabriel Burin in Buenos Aires; Editing by Ross Finley, Kirsten Donovan)
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