MEXICO CITY (Reuters) – Mexico’s central bank board could discuss a rate cut of either 25 basis points or 50 basis points in its next decision in February, Deputy Governor Jonathan Heath told Reuters.
The monetary authority has been cutting rates by 25 basis points since kicking off an easing cycle earlier this year, but said last week it was open to larger cuts as inflation continues to slow.
However, Heath warned that the possibility of tariffs on U.S. imports from Mexico has added uncertainty. The U.S. President-elect Donald Trump promised to apply a blanket 25% tariff on goods from Mexico if more action is not taken to curb the flow of drugs and migrants into the United States.
Heath said that if Trump doesn’t announce a major disruption and inflation is in line with projections and there’s no unanticipated shock, discussion prior to the February decision could be between cutting the benchmark rate by 25 to 50 basis points.
The decision is dependent on other factors such as the economic outlook, ratings agencies’ perspectives and more information on services inflation, which has been sticky.
Analysts polled by the central bank expect the Mexican economy to grow just 1.12% next year, from around 1.6% this year. They see headline inflation closing 2025 at 3.8%, slowing from 4.37% at end-2024.
Heath attributed the expected slowdown to cautiousness from the private sector in the face of an uncertain and high-risk environment, as well as a tight fiscal policy with little wiggle room as the government works to rein in the deficit.
He also warned that anything larger than a 50-basis-point cut from the current 10% rate would be “completely out of the question.”