Bank Of Mexico Lowers Key Interest Rate, Opens Door to Larger Cuts

• Mexico's central bank lowered its benchmark interest rate by 25 basis points to 10.00% on Thursday, December 19, 2024, and signaled larger rate cuts could be considered in future meetings given progress on inflation in Latin America's second-largest economy.
• The unanimous decision by the Bank of Mexico's five-member governing board is the fifth rate cut this year since it started lowering borrowing costs from a record high of 11.25% in March.
• "In view of the progress on disinflation, larger downward adjustments could be considered in some meetings, albeit maintaining a restrictive stance," Banxico, as the bank is known, said in a post-meeting statement.
• Mexico's closely watched core consumer price index, seen as a more reliable measure of price trends as it excludes volatile energy and food prices, fell to 3.58% in the 12 months through November, from 3.80% in October.
• Banxico targets inflation at 3%, plus or minus a percentage point. While both headline and core inflation are still forecast to follow a downward trend, the board raised its year-end inflation forecasts for 2024 and 2025.
• The board now sees headline inflation reaching the 3% target in the third quarter of 2026, later than the board's previous guidance of the fourth quarter of 2025.
• After the board's unanimous cut in mid-November, Mexican markets were rattled by U.S. President-elect Donald Trump's threat of a 25% across-the-board tariff on imports from Mexico. Thursday's statement referenced the Mexican peso's volatility amid "the possibility of measures that could weaken integration with our main trading partner."

(Source: Reuters)