Bank of Mexico cuts key interest rate to near three-year low
June 26 (Reuters) - The Bank of Mexico lowered its benchmark rate by 50 basis points on Thursday as largely expected, although the decision by the central bank's five-member governing board was not unanimous.
The move brings the rate to 8.0%, the lowest since August 2022.
Deputy Governor Jonathan Heath was the sole dissenter, voting to hold the rate at its previous 8.5% level. In prior decisions, he agreed with rate cuts by the board.
Markets had largely expected the 50 basis point cut, with 21 of 26 analysts polled by Reuters expecting the decision. The Mexican peso strengthened just over 0.2% against the dollar after the central bank's decision.
Heath told Reuters earlier this month he supported a "more cautious, more prudent" approach until inflation resumed a clear downward trajectory.
Annual headline inflation in Latin America's No. 2 economy has ticked up in recent months and jumped above the central bank's target range in May. It cooled slightly in the first half of June from the second half of May, hitting 4.51%, but still outside the central bank's target range of 3% plus or minus a percentage point.
In its statement on Thursday, the central bank raised its forecast for year-end average headline inflation to 3.7% from its May forecast of 3.3%, although the bank held its estimate that inflation will converge to 3% in the third quarter of 2026.
Banxico, as the Bank of Mexico is known, is balancing dual challenges: It is seeking to bring down inflation while also stimulating the economy amid weak economic growth and uncertainty tied to trade tensions and geopolitical developments.
The board said in its statement that its decision was "made considering the behavior of the exchange rate, the weakness of economic activity, and the possible impact of changes in trade policies worldwide."
"Looking ahead, the Board will assess further adjustments to the reference rate," the statement said.
Notably, Thursday's decision did not include language from the most recent three monetary policy decisions about considering future cuts of "similar magnitudes."
Private sector analysts polled by Reuters in May projected that Banxico will downsize its rate cuts for the rest of the year. Their median forecast was that the central bank will end 2025 with a benchmark rate of 7.5%.
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