Bank of Mexico Cautious After Interest-Rate Cut, Minutes Show

By Anthony Harrup

MEXICO CITY--Mexican central bankers agreed last month that the conflict in the Middle East added to inflation and growth risks, with a majority voting for an interest-rate cut saying that the bank's monetary stance was adequate to face the challenges, minutes of the meeting showed Thursday.

The Bank of Mexico lowered its benchmark interest rate by a quarter percentage point to 6.75% on March 26 in a 3-2 split decision, with two board members voting to leave the rate at 7%. The bank left the door open for an additional rate cut ahead, but said the board would evaluate the "appropriateness and timing" for such a move.

The March interest-rate cut followed a pause in February.

Mexico's inflation has risen the past three months to 4.59% in March from 3.69% in December, largely the result of higher fruit and vegetable prices. Core inflation stood at 4.45% last month versus 4.33% in December. The central bank has a 3% inflation target.

A majority of board members said that this year's tax increases on soft drinks and tobacco had a limited one-off impact on inflation, with no evidence of second-round effects. Most also considered that weakness in the economy would put downward pressure on inflation, according to the minutes.

Most members saw inflation risks from rising global oil prices, with all agreeing that the impact would be cushioned by the Mexican government's tax breaks on fuel and agreements with retailers to contain gasoline and diesel prices. One member also noted Mexico's access to cheap imports of U.S. natural gas via pipelines.

In a dissenting opinion included in the minutes, Deputy Gov. Galia Borja said the conflict in the Middle East introduced new risks for inflation and economic activity, and that there was limited information to assess its implications. "I consider that the current level of the reference rate is adequate to more accurately evaluate the evolution of the inflation outlook and the current shock," she said.

Deputy Gov. Jonathan Heath, who also voted to stay on hold, said the balance of risks for inflation "has tilted far more to the upside" with the military conflict and an unexpected rise in agricultural prices. "Since we are facing greater risks, we have nothing to lose by making a pause until these shocks truly dissipate," he said.

Most board members "seem to be open to an additional rate cut depending on the evolution of the conflict," Citi Research analysts Julio Ruiz and Felipe Juncal said in a note. "In any case, all board members now seem to be on board to assess the external environment and its impact on inflation before considering another rate cut."

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

April 09, 2026 14:16 ET (18:16 GMT)