Business · Economy · 5 hrs ago
Banks say Banxico may still cut interest rates after a pause
Mexico’s central bank, Banxico, has signaled a pause after setting its benchmark interest rate at 6.25%.
Barclays and UBS say that a pause for a prolonged period does not mean the bank has ruled out further cuts.
Governor Victoria Rodríguez Ceja said officials had discussed a quarter-point cut since September before deciding to make the adjustment.
She said overall inflation rose from 3.42% to 3.62% between the first halves of September and October, mainly because of changes in fruit and vegetable prices.
Core inflation was 3.78% and had generally been declining since the start of the year, she said.
Inflation and the peso’s value are key factors in deciding whether further cuts are appropriate.
Barclays expects another 25-basis-point cut in March 2027, followed by rates holding at 6%; UBS says future cuts will depend in part on inflation expectations and currency pressures.
Banxico Governor Victoria Rodríguez Ceja said the bank’s governing board had been weighing a quarter-point cut since its September policy decision.
The bank later decided to make an adjustment after reviewing inflation and its drivers, Rodríguez said.
Rodríguez said overall inflation rose from 3.42% to 3.62% between the first halves of September and October, as expected.
Barclays and UBS interpreted Banxico’s guidance about keeping rates steady for a prolonged period as leaving room for further cuts.
The policy rate was 6.25%, and Barclays forecast another 25-basis-point cut in March 2027.
- Who
- Banxico Governor Victoria Rodríguez Ceja said the bank’s governing board had discussed cutting the rate.
- What
- The board weighed a quarter-point reduction and later decided to make an adjustment.
- When
- The discussion had begun by the September policy decision. The date of the later decision is not stated.
- Where
- Mexico.
- Why
- Rodríguez said the decision followed a rigorous assessment of the inflation outlook and its drivers.
Banxico’s guidance
Barclays and UBS
Interpretation of rate guidance
Banxico’s guidance
Banxico said it expected to keep the rate at 6.25% for a prolonged period.
Barclays and UBS
Barclays and UBS said the wording did not rule out future cuts.
Next policy move
Banxico’s guidance
The bank’s stated guidance suggested a pause.
Barclays and UBS
Barclays expected a 25-basis-point cut in March 2027; UBS said further cuts could be possible if inflation expectations remained anchored.
Banxico’s governing board was already assessing whether to make a quarter-point adjustment to its target rate.
Headline inflation rose from 3.42% to 3.62%, a change Rodríguez said was anticipated.
Banxico revisited the discussion and decided to make an adjustment after assessing the inflation outlook.
- Policy rate
- 6.25%
- Rate cut considered
- One quarter-point
- Headline inflation
- Rose from 3.42% to 3.62%
- Core inflation
- 3.78%
- Barclays forecast
- Another 25-basis-point cut in March 2027, followed by a pause at 6%
3 sources
What people are saying
Since our previous decision, we had been assessing the convenience of making a one-off adjustment to our target rate in light of the inflation environment we are facing.
The increase observed in headline inflation from 3.42 percent to 3.62 percent between the first half of September and the first half of October was anticipated.
Not necessarily. Our interpretation is that Banxico will keep interest rates stable while the Federal Reserve completes its cycle of rate hikes.
We expect another 25-basis-point cut in March 2027, followed by a pause at 6%.