- 21 of 26 economists predict that Banxico will cut the rates of 8.50% to 8.00% next week.
- Subgovernor Heath points out caution, favoring a break to evaluate the data.
- The majority see that the relaxation rhythm is slowed, with rates probably at 7.50% for the third quarter of 2025.
It is projected that the Bank of Mexico (Banxico) will continue its relaxation cycle next week, despite the fact that the latest inflation reports in Mexico suggest that the risks are inclined up. Inflation in May exceeded the goal of 3% of the bank, increasing concerns that the Central Bank would continue to reduce rates.
Most economists expect a fourth consecutive cut of 50 basic points, although requests for a slower pace in the future grow
On Friday, a Reuters survey revealed that 21 of 26 economists project that the Central Bank will relax the rates of 8.50% to 8%. This would be the fourth consecutive cut of 50 basic points (PBS).
Of five economists, three expect a gradual approach from Banxico, while the other two expect the Mexican institution to keep the rates without changes.
Last week, subgovernor Jonathan Heath told Reuters that he believes that the 50 PBS of relaxation should be slow until more data can be evaluated.
According to economists surveyed by Reuters, 15 participants indicated that Banxico could slow the relaxation rate in subsequent meetings, the following being the next scheduled. Most of the economists surveyed expect the main interest interest rate of Mexico to remain at 7.50% in the third quarter of 2025.
BANXICO FAQS
The Bank of Mexico, also known as Banxico, is the central bank of the country. Its mission is to preserve the value of the Mexican currency, the Mexican weight (MXN), and set the monetary policy. For this, its main objective is to maintain low and stable inflation within the target levels – in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%.
The main Banxico tool to guide monetary policy is the fixation of interest rates. When inflation is above the goal, the bank will try to control it by raising the rates, which makes the debt of homes and companies more expensive and, therefore, cools the economy. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN. The rate differential with the dollar, or the way in which Banxico is expected to set interest rates compared to the United States Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year and its monetary policy is very influenced by the decisions of the United States Federal Reserve (Fed). Therefore, the decision -making committee of the Central Bank usually meets a week after the Fed. In this way, Banxico reacts and sometimes anticipates the monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised the rates, Banxico first did it in an attempt to reduce the possibilities of a substantial depreciation of the Mexican weight (MXN) and avoid capital outputs that could destabilize the country.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
