- Decision
- Lower
- Rate change
- 50 bps
- overnight interbank interest rate
- 9%
Banco de México’s Governing Board cut the target for the overnight interbank rate by 50 bp to 9.00 % effective 28 March 2025, judging that the disinflation process is “well on track” and that lower rates are consistent with still-restrictive conditions amid weaker domestic activity and heightened global trade and geopolitical risks. Following a 50 bp reduction to 9.50 % in February from 10.00 %, the Board again acted unanimously. The operating framework remains centred on the overnight interbank rate, with no other liquidity measures announced. Headline inflation stood at 3.67 % and core at 3.56 % in the first half of March, headline expectations for end-2025 have eased, and the central bank continues to project convergence to the 3 % target in Q3 2026, though the balance of risks—dominated by potential peso depreciation, trade frictions, cost pressures and climate effects—remains skewed to the upside despite some improvement. Economic activity is expected to stay weak in Q1 2025, government bond yields have fallen across the curve and the peso has firmed slightly within a wide range. Externally, global growth prospects, including for the United States, have been revised down as escalating tariffs and geopolitical tensions weigh on sentiment and spur dollar depreciation. The Board signalled it may “continue calibrating” policy with further cuts of similar size while ensuring the stance stays restrictive enough to secure a sustained convergence of inflation to target.
Rate evolution
The Bank of Mexico lowered the policy rate by 100 basis points from 8.00% in June 2025 to 7.00% in December 2025, moving from a 50 basis point cut to a run of 25 basis point reductions, before pausing in February 2026, resuming easing with a 25 basis point cut to 6.75% on March 26, effective March 27, and maintaining the target for the overnight interbank interest rate at 6.50% on June 25, August 6 and September 24. The Governing Board eased as economic activity weakened and trade tensions posed downside risks, while mixed inflation dynamics and persistent core inflation led it to revise forecasts and, in August, delay expected convergence to target to the fourth quarter of 2027, a timeframe it retained in September.
On February 5, the Board left the target at 7.00%, judging it appropriate to pause the rate-cutting cycle while assessing the revised inflation outlook, fiscal adjustments introduced at the beginning of the year, exchange rate developments, weak activity and the degree of monetary restriction, before resuming rate cuts on March 26 after considering observed exchange rate levels, weak activity and the degree of monetary restriction, even as headline inflation rose to 4.63% in the first fortnight of March from 3.77% in the first fortnight of January, core inflation remained at 4.46%, and risks to the inflation path stayed biased to the upside. On June 25, the Board unanimously maintained the target at 6.50% after assessing exchange rate levels, the absence of demand-related pressures and the degree of monetary restriction, while headline and core inflation had declined to 3.55% and 4.12%, respectively, in the first fortnight of June and the economy was expected to expand in the second quarter after contracting in the first. On August 6, it unanimously held the target at 6.50% and signalled that maintaining the rate at its current level would be appropriate, noting that the economy had rebounded in the second quarter and slack was expected to persist, while headline and core inflation fell to 3.10% and 3.95%, respectively, in the first fortnight of July. On September 24, the Board again unanimously held the target at 6.50% after assessing exchange rate behavior, the different stages of the economic cycles in Mexico and the United States, the absence of demand pressures in Mexico and the degree of monetary restriction, as third-quarter activity appeared to moderate and slack was expected to persist, while headline inflation rose to 3.42% in the first fortnight of September due to higher non-core inflation and core inflation declined to 3.79%.