Mexico: Central Bank decides to decrease rates in February
Latest bank decision: At its meeting on 6 February, the Central Bank decided to lower the target for the overnight interbank interest rate by 50 basis points to 9.50%. Interest rates have now fallen by 175 basis points since early 2024.
Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision were multi-year low inflation at the outset of 2025 plus an unexpectedly large GDP contraction during the fourth quarter of 2024.
Policy outlook: The Central Bank suggested it might continue cutting rates by similar magnitudes in the future. Our Consensus is for slightly over 100 basis points of cuts by year-end, with downward revisions likely on the back of the Bank’s updated forward guidance. Eventual U.S. tariffs on Mexico are the key risk factor; implementation of tariffs would likely cause Mexico’s Central Bank to deepen monetary easing.
Panelist insight: On the outlook, BBVA analysts said:
“The statement’s forward guidance signals a set of consecutive rate cuts ahead and keeps the door wide open for additional large cuts. Today’s larger cut supports our below-consensus 8.0% rate by the end of the year, but we now think there’s a bias towards more easing this year.”
Itaú Unibanco analysts were slightly more hawkish:
“Our base case remains for the central bank to continue easing in 2025, cutting again the monetary policy rate by 50-bp and then, as they approach the end of the cycle, choosing a more moderate pace of 25-bp (YE25 8.5%).”