Bank of Mexico Cuts Benchmark Rate to 7.50% in Tenth Consecutive Cut Amid Inflation, Sluggish Economy

The Bank of Mexico cut its benchmark interest rate by 25 basis points to 7.50%, marking the tenth consecutive reduction aimed at supporting a sluggish economy amid persistent inflation and global trade uncertainties. The decision was made by a 4-1 vote, with Deputy Governor Jonathan Heath dissenting to keep rates unchanged at 7.75%, reflecting internal debate on the pace of easing. The central bank highlighted concerns over sluggish economic activity, a stronger peso, and global trade tensions, while projecting inflation to return to the 3% target by the third quarter of 2026. Core inflation remains elevated, recently rising to 4.26%, with forecasts for the fourth quarter of 2025 revised upward to 4.0%. The rate cut aligns with moves by the U.S. Federal Reserve, providing Banxico more room for monetary policy adjustments. Overall, the bank is cautiously balancing efforts to stimulate growth against the risk of fueling inflation in a challenging economic environment.