Bank Of Mexico Board Opens Door to Larger Rate Cuts

• The Bank of Mexico could increase the size of cuts to its benchmark interest rate in future meetings as inflation eases in Latin America's second-largest economy, minutes from the central bank's December monetary policy meeting showed on Thursday, January 9, 2025.
• Banxico, as the Mexican central bank is known, lowered its benchmark interest rate by 25 basis points (bps) to 10.00% in a unanimous decision by its five-member governing board last month.
• "In view of the progress on disinflation, larger downward adjustments could be considered in some meetings, albeit maintaining a restrictive stance," the minutes said. A breakdown of all the board members' positions showed several of them supporting the discussion of larger rate cuts.
• Banxico began a rate-cutting cycle last March amid easing inflation, ultimately delivering five 25bos cuts and bringing the benchmark rate down from the record 11.25% reached in 2023.
• At the December meeting, one of the five members pointed to "the undeniable progress in disinflation" as supporting their view that "it is necessary to increase the magnitude of rate cuts in some of the upcoming monetary policy decisions." Another member noted "the importance of communicating that larger adjustments of larger magnitude could be implemented at the next policy meetings."
• The minutes showed that while two members called for caution in December, the board highlighted inflation's downward trajectory, even while upwardly revising its year-end inflation forecasts for 2025 at the meeting.
• Mexico's annual headline inflation rate fell more than expected in December, reaching 4.21%, official data published earlier on Thursday showed. Banxico targets inflation at 3%, plus or minus one percentage point.

(Source: Reuters)