By Ana Isabel Martinez

Mexico Central Bank Rate Cut Discussion

MEXICO CITY (Reuters) – Mexico's central bank board may consider a rate cut of 25 or 50 basis points in February, according to Deputy Governor Jonathan Heath. This decision will hinge on economic conditions at the time.

Current Rate Cut Trend

The bank has recently implemented 25 basis points cuts as part of an easing cycle; however, larger cuts are possible as inflation slows.

Trade Uncertainty

Heath expressed concerns over uncertainty due to potential U.S. tariffs on Mexican imports, which President-elect Donald Trump proposed if measures aren’t taken against drugs and migration.

> "If Trump doesn't announce a major disruption in his inauguration speech on Jan. 20, and inflation aligns with expectations, discussions could range from a 25 to 50 basis point cut," Heath stated.

Factors Influencing Decisions

Other considerations include economic outlook, rating agencies' opinions, and persistent inflation in services. Any adjustment beyond a 50 basis point cut is unlikely.

Board Dynamics

Heath indicated that board decisions may not be unanimous, given differing opinions on the extent of rate cuts required to control inflation.

Future Projections

With current data, a benchmark rate of between 8% and 8.5% is expected by the end of 2025. Analysts forecast a modest economic growth of 1.12% next year and a decline in headline inflation to 3.8% by the end of 2025, influenced by a cautious private sector and stringent fiscal policy.

> "As long as sluggishness persists, hitting our inflation targets within the estimated timeframe becomes more likely," Heath mentioned. He anticipates that by 2026, barring negative shocks, inflation could normalize around 3%, with a neutral monetary stance and robust economic growth.