Mexico Interest Rate

The Bank of Mexico lowered its key rate by 25 bps to 7.75% in its August meeting, as annual inflation declined from 4.51% in mid-June to 3.51% in July and the domestic economy expanded at a slightly faster pace in Q2 than in Q1, though slack persists. The release indicated that the Board deemed appropriate a continued cycle of rate cuts, taking into account the degree of monetary restriction implemented and anticipating that the ongoing disinflation process will allow further easing while preserving a restrictive stance. However, the central bank remains cautious amid elevated global uncertainty, from trade tensions to geopolitical conflicts, that could reignite inflation via peso depreciation or deepen the economic slowdown. While progress toward the 3% inflation target remains on track, with forecasts unchanged and still pointing to convergence by the third quarter of 2026, members underscored the importance of a flexible policy framework.