Most members of the Bank of Mexico\u2019s governing board now favor a more cautious pace of monetary easing, according to minutes from June\u2019s rate decision. After four consecutive cuts, including a 50-basis-point reduction last month, the majority of policymakers suggest the central bank may be approaching the limit of aggressive action as inflation remains above target and economic growth stays sluggish.<\/p>\n\n\n\n
All four board members who supported June\u2019s half-point cut expressed support for scaling back future adjustments. At least two suggested that the June cut should be the final one of that magnitude, opening the door to smaller, more gradual moves in coming months.<\/p>\n\n\n\n
\u201cThe central argument is that the weakness in the economy will create slack conditions that would allow inflation to converge toward the 3.0% target,\u201d analysts at Actinver noted, citing the board\u2019s general consensus. One member emphasized that the current policy stance is \u201cappropriate to address risks to inflation,\u201d adding that adjustments ahead will likely be \u201cmore gradual.\u201d<\/p>\n\n\n\n
Mexico\u2019s annual headline inflation eased to 4.32% in June, down from a recent streak of four consecutive monthly increases, but still above the central bank\u2019s target range of 3%, plus or minus one percentage point. More concerning for Banxico is the uptick in core inflation, which strips out volatile components and rose to 4.24% \u2014 the highest since April 2024.<\/p>\n\n\n\n
This core measure complicates the rate-cutting cycle. While some board members remain optimistic that weak growth will bring inflation down naturally, others question whether that view is too optimistic. Deputy Governor Jonathan Heath, the only board member to vote against the June cut, argued that relying on \u201cgreater slack conditions\u201d to tame inflation is \u201cunrealistic.\u201d<\/p>\n\n\n\n
\u201cEven though there is economic stagnation, current forecasts do not point to a deep enough recession that would sufficiently weaken aggregate demand,\u201d Heath said, defending his vote to hold the benchmark rate at 8.50%.<\/p>\n\n\n\n
Mexico\u2019s economic performance continues to disappoint. Banxico\u2019s latest GDP forecast projects growth of just 0.1% for 2025, while analysts surveyed by the central bank in late June predict a mere 0.2% expansion for this year. This weak outlook provides some justification for continued monetary easing, but persistent inflation is creating a difficult policy trade-off.<\/p>\n\n\n\n
Banxico has lowered its benchmark rate by 325 basis points since the start of 2024, including 200 basis points so far this year. Despite this, growth remains flat and inflation pressures are proving stubborn.<\/p>\n\n\n\n
Alberto Ramos, head of Latin America economics at Goldman Sachs, noted that while the board maintains a generally dovish stance, \u201cit is now more cautious,\u201d with expectations shifting toward a smaller 25-basis-point cut at the next policy meeting in August.<\/p>\n\n\n\n
As Banxico prepares for its next decision, the balance of risks between inflation control and growth support is narrowing. Most of the board agrees on proceeding carefully, with smaller rate cuts more likely to be adopted in upcoming meetings. The challenge lies in calibrating monetary policy that can keep inflation on a downward path without stifling what little momentum remains in the Mexican economy.<\/p>\n\n\n\n
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Governing board leans toward smaller rate cuts Most members of the Bank of Mexico\u2019s governing board now favor a more cautious pace of monetary easing, according to minutes from June\u2019s rate decision. After four consecutive cuts, including a 50-basis-point reduction last month, the majority of policymakers suggest the central bank may be approaching the limit<\/p>\n","protected":false},"author":5,"featured_media":6798,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46],"tags":[4342,4034,3812,290,4341,4340,4339,4035,293,2715],"class_list":{"0":"post-6797","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-banco-de-mexico","9":"tag-banxico","10":"tag-core-inflation","11":"tag-economic-growth","12":"tag-gdp-forecast","13":"tag-interest-rate","14":"tag-jonathan-heath","15":"tag-mexico-inflation","16":"tag-monetary-policy","17":"tag-rate-cut"},"_links":{"self":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts\/6797"}],"collection":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6797"}],"version-history":[{"count":1,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts\/6797\/revisions"}],"predecessor-version":[{"id":6799,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts\/6797\/revisions\/6799"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/media\/6798"}],"wp:attachment":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6797"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6797"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6797"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}