The Central Bank of Mexico is considering a potential rate cut of 25 or 50 basis points in its upcoming February 2025 decision, according to Deputy Governor Jonathan Heath. The decision is contingent on the conditions present at the time of the meeting, including the uncertain state of U.S. trade. Heath expressed concerns over the potential tariffs on U.S. imports from Mexico, which could add to the uncertainty.
The bank has been reducing rates by 25 basis points since the start of an easing cycle earlier this year, with a willingness to consider larger cuts as inflation continues to slow. However, the decision will also hinge on factors such as the economic outlook, ratings agencies’ views, and information on services inflation, which has remained stubbornly high.
Heath ruled out any cut larger than 50 basis points from the current 10% rate as off the table, and a larger adjustment is not guaranteed. The decision may not be unanimous among the board members, who differ on the speed and size of rate cuts needed to bring inflation back within target.
Analysts polled by the central bank project the Mexican economy to grow by 1.12% in 2025, down from 1.6% in 2024, with headline inflation expected to close 2025 at 3.8%, down from 4.37% at the end of 2024. Heath predicts that the economy will enter a phase of robust expansion by 2026, assuming Mexico avoids negative shocks.
