Mexico: Central Bank decreases rates in September
Latest bank decision: At its meeting on 26 September, the Central Bank decided to lower the target for the overnight interbank interest rate by 25 basis points to 10.50%.
Monetary policy drivers: The Central Bank’s decision was primarily influenced by a prolonged period of weak economic activity, slowing employment, and the downward trend in core inflation so far this year—notwithstanding the rise in headline inflation since May. Core inflation was at the upper bound of the Bank’s 2.0–4.0% target range in July and August, following above-target readings since early 2021.
Policy outlook: The Central Bank hinted strongly at further rate cuts going forward, stating that “the inflationary environment will allow further reference rate adjustments”. This is in line with our panelists’ projections for up to 100 basis points of additional cuts by the end of this year.
Panelist insight: On the outlook, BBVA analysts said:
“The wording of the statement turned more dovish but remained cautious; forward guidance signaled more confidence about the rate cut cycle going forward. We expect two more 25bp rate cuts in November and December, to 10.00%.”