Mexico's central bank cut its key interest rate for the tenth consecutive time, to 7.5%. The country's monetary authorities are concerned about weak growth, as well as the lack of visibility and the still high risks that continue to impact foreign trade.
They are significant because the relations with the United States, by far Mexico's most important trading partner, are evolving according to the White House's moods.
For the time being, the markets appreciate this less restrictive monetary policy, which should promote economic activity in the country. Despite the uncertainty in foreign trade, the Mexican stock market is performing well, and investors expect further rate cuts by the end of the year.
Inflation may reach up to 4%
But inflation is worrying. If it was close to 3.5% in July and August, it is expected to reach higher levels towards the end of the year, a period for which Banxico expects a rate close to 4%.
The room for manoeuvre for the central bank to continue the downward movement in its key rates is therefore decreasing, and they should stabilise in 2026.
Despite all those challenges, we invest in Mexico as part of our neutral and dynamic portfolios. For suggestions of other markets, see our complete asset allocation strategy.
The Mexican Policy Rate
Another month, another cut in the Mexican key rate. While further movements can be expected by the end of the year, 2026 is expected to be quieter on this front.
