The Bank of Mexico (Banxico) will reduce its key interest rate to 7% at its meeting on December 18, according to a Reuters poll of economists, who showed a nearly equal split on whether monetary authorities will implement another cut early next year.
It would be the thirteenth cut since February 2024, after the reference cost of borrowing reached a record of 11.25%. Just over half of analysts looking ahead to next year expect one or two more cuts by the end of March, while the rest predict a pause in the long easing cycle.
Next week’s monetary policy statement is expected to reinforce a cautious tone, as concerns about weak economic conditions are offset by higher inflation risks amid a still uncertain trade outlook.
This would put Banxico on a similar trajectory to that of the US Federal Reserve (Fed), which cut interest rates this week, but noted that the bar for further short-term easing is high. Banxico’s five-member board is set to cut the benchmark rate by a quarter of a percentage point, from 7.25 to 7.00%, at Thursday’s meeting, according to the 29 economists surveyed Dec. 8-11.
“Despite persistent inflation pressures, we still expect a 25 basis point cut,” Morgan Stanley analysts said. “However, these pressures, the January health taxes and the possible transfer of tariffs increase the likelihood of a pause in February.”
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Economists affirm that Banxico will maintain the rate at 7.00%
Last month, Banxico cut its growth forecast for the economy to almost zero and maintained an estimate of a slow 1.1% expansion in 2026.
He also reiterated his view that inflation would reach the 3% target by the second half of next year, but slightly raised forecasts for consumer price increases for some future periods.
The annual inflation rate accelerated more than expected in November, to 3.80%, and one of the central bank’s board members warned of additional risks for next year. Another monetary policy official, Jonathan Heath, was more forceful, stating that Banxico’s forecasts faced a “credibility crisis” given the unlikelihood of reaching the 3% inflation goal in just a few months.
Of the 21 respondents who offered quarterly forecasts, 10 projected that Banxico would keep the rate at 7.00% during the January-March period, while seven projected it at 6.50% and four at 6.75%, with a median estimate of 6.75%.
This contrasts with the November survey, where seven of 19 economists predicted the bank would maintain or raise rates in the first quarter, from 7.00% in December 2025, with a consensus estimate also of 6.75%.
In the latest survey, of 21 economists who answered an additional question about the bank’s next measures after this month’s decision, nine predicted a cut in February, two in March and the other 10 in different months of 2026.
“By 2026, we expect Banxico to pause in the first quarter to analyze the pressures on prices derived from the imposition of tariffs and taxes,” declared Iván Arias, economist at Banamex. “Then, it will resume easing with a couple of cuts in May and June to reach a terminal rate of 6.50%.”
With information from Reuters
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