Bank of Mexico Ends Easing Cycle With Interest-Rate Cut — Update

By Anthony Harrup

MEXICO CITY--The Bank of Mexico lowered its benchmark interest rate Thursday in a split decision, saying the cut is the last one of the current easing cycle.

The five-member board of governors voted 3-2 to reduce the overnight interest-rate target by a quarter of a percentage point to 6.5%, a four-year low. Deputy governors Galia Borja and Jonathan Heath voted to leave the rate at 6.75%.

The board "deemed appropriate to make an additional reference rate cut and thereby conclude the cycle that began in March 2024," the central bank said. Looking ahead, the board "estimates that it will be appropriate to maintain the reference rate at its current level."

The Bank of Mexico was widely expected to make the rate cut after inflation eased in April and economic activity contracted more than expected in the first quarter amid declines in industrial production, services and agriculture.

Significant downside risks to economic growth remain, the central bank said.

Inflation slowed in April to 4.45% from 4.59% in March, and core inflation eased to 4.26% from 4.45%. The central bank raised its inflation forecasts slightly for the second and third quarters of this year, while leaving its core inflation forecasts intact.

The Bank of Mexico said the balance of risks to the forecasts remains tilted to the upside, but that it still expects inflation to reach its 3% target in the second quarter of 2027.

The central bank's inflation forecasts have been "perennially rosy," and the bank is more concerned with growth than above-target inflation, said Alberto Ramos, chief Latin America economist at Goldman Sachs.

"I would not be surprised if two to three meetings from now, come September and GDP remains sluggish, that they say, we think probably we need to do a little bit more," he said.

Citi analysts Julio Ruiz and Felipe Juncal expect the Bank of Mexico to stay on hold the rest of this year. But if there are clear signs of de-escalation on the geopolitical front, economic weakness persists, and the Mexican peso remains resilient, "we do not discount the board considering cuts at the end of the year or the beginning of next year," they said in a note.

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

(END) Dow Jones Newswires

May 07, 2026 17:30 ET (21:30 GMT)