Central Bank decreases rates in November

Latest bank decision: At its meeting on 14 November, the Central Bank decided to reduce the target for the overnight interbank interest rate by 25 basis points to 10.25%, taking total rate cuts this year to 75 basis points.

Monetary policy drivers: The decision was primarily influenced by the fact that core inflation continued to trend down through October, as well as by the Bank’s downbeat economic outlook for 2025 and its view that GDP growth risks were skewed to the downside.

More monetary easing on the cards: The Central Bank said that it expects the inflationary environment to permit further rate cuts in the future, given the expected fading of global shocks and economic activity weakness. Our Consensus is for the policy rate to be over 200 basis points lower than its current level by end-2025.

Panelist insight: BBVA analysts said: “The stronger-than-expected pace of economic activity in the third quarter does not seem to have affected the confidence of board members in the inflation outlook. Banxico left the door wide open to rate cuts in upcoming meetings and signaled that the cycle has legs in a backdrop of a lack of growth dynamism next year. However, we now think that it might be somewhat more cautious next year with the Fed probably halting its cycle sooner the potential imposition of US tariffs.” Goldman Sachs’ Alberto Ramos said: “We expect the MPC to deliver another 25bp rate cut at the Dec meeting and in our assessment the bar to accelerate the pace of cuts to 50bp is relatively high given prevailing domestic and external uncertainty, in particular around a number of issues in the US-Mexico bilateral agenda (trade policy (tariffs) first-and-foremost).”

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