Bank of Mexico Cuts GDP Growth Forecasts Amid U.S. Trade Uncertainty

The Bank of Mexico has significantly lowered its economic growth forecasts for 2025 and 2026, citing sluggish domestic activity and uncertainty stemming from U.S. trade policies, particularly tariffs. The central bank now expects Mexico's GDP to grow by only 0.1% this year, down from an earlier estimate of 0.6%, and has halved its 2026 growth forecast to 0.9% from 1.8%. Despite domestic weaknesses and challenges from U.S. tariff policies, Mexican exports have remained resilient so far, partly due to preferential treatment under the U.S.-Mexico-Canada Agreement, though slower U.S. growth could reduce demand for Mexican goods. The Bank of Mexico has responded to these economic concerns by accelerating monetary easing, lowering its benchmark interest rate to 8.5%, with further cuts possible. While the economy narrowly avoided a technical recession by growing 0.2% in the first quarter of 2025, the central bank emphasizes ongoing economic stagnation but does not currently foresee a recession. Inflation is expected to return to the 3% target by the third quarter of 2025.