Mexico’s central bank is expected to cut its key interest rate by another 50 basis points at its next policy meeting on June 26, even as inflation rises above target levels.
Inflation climbed to 4.42% in May, its highest level since November, while core inflation rose to 4.06%, the highest in almost a year. Both figures exceed the central bank’s target of 3%, plus or minus one percentage point.
Despite the rise in inflation, economists expect the Bank of Mexico to proceed with its fourth consecutive 50-basis-point cut, which would bring the benchmark rate to 8%. That would be the lowest level in three years.
The central bank began easing rates in early 2024 after reaching a record high of 11.25%. Some observers say the central bank still sees current rates as too restrictive for the level of inflation.
Others believe the central bank should slow the pace of cuts or pause, due to concerns that continued inflation could affect long-term expectations.
The bank has said it will keep a restrictive stance but also continues to signal further cuts depending on inflation trends. A statement from the June meeting is expected to reflect a more cautious tone.
Mexico’s economy narrowly avoided a recession in the first quarter of 2025. The central bank recently cut its growth forecast for 2025 to 0.1%, down from 0.6%, citing weak activity and external risks.
Monetary policy is expected to continue supporting economic growth, but future rate decisions will likely depend on the direction of consumer prices.
