Mexico Central Bank Cuts Rate Again On High Inflation, Weak Economy

(RTTNews) - The Bank of Mexico cut its key interest for a tenth policy session in a row, on Thursday, in a bid to support the sluggish economy amid high inflation and the heightened uncertainty posed by the U.S. trade tariffs.

The Banxico Governing Board, led by Governor Victoria Rodríguez Ceja, decided to lower the target for the overnight interbank interest rate by 25 basis points to 7.50 percent, in line with expectations. The previous change was a similar reduction in August that followed four half-points cuts since the start of the year.

The central bank has cut interest rates by a total 350 basis points since August last year.

The latest rate cut was decided in a split vote of 4-1 with Deputy Governor Jonathan Heath again opting to maintain the rate unchanged.

"The Governing Board deemed appropriate to continue the rate-cutting cycle," the bank said in a statement. "This decision was consistent with the assessment of the current inflationary outlook."

Policymakers considered a stronger peso, the sluggish economic activity, and the possible impact of changes in trade policies worldwide as well as the latest Fed rate cut and the likelihood of more easing.

"Looking ahead, the Board will assess further adjustments to the reference rate," the bank said.

Statistical data released on Wednesday showed that headline inflation accelerated to 3.74 percent in the first half of September. Inflation was 3.57 percent in the month of August.

Core inflation that excludes volatile items such as food and energy, climbed to 4.26 percent.

Banxico targets inflation of 3.00 percent. In the latest projections, released on Thursday, the central bank raised the core inflation forecast for the fourth quarter of this year to 4.00 percent from 3.70 percent. The rate is seen returning to the target by the third quarter of next year.

"Economic activity exhibited sluggishness at the beginning of the third quarter of 2025," the bank observed. "The environment of uncertainty and trade tensions poses significant downward risks."

The Mexican economy expanded 0.6 percent in the second quarter, following a 0.3 percent growth in the first three months of the year.