Central Bank of Mexico minutes show 4-1 vote to cut the overnight rate target to 7.00%

The Central Bank of Mexico published minutes of its Governing Board meeting associated with the monetary policy decision announced on 18 December 2025, confirming a 25 basis point cut in the target for the overnight interbank interest rate to 7.00% as it continued its easing cycle. The decision passed 4-1, with Jonathan Ernest Heath Constable voting to keep the rate at 7.25%. The discussion pointed to weak domestic activity, peso appreciation and heightened uncertainty linked to United States trade policy as supporting a reduction in the degree of monetary restriction. Members noted that inflation rose from 3.63% in mid-October to 3.80% in November, while core inflation increased to 4.43%, largely reflecting base effects and fewer discount promotions during El Buen Fin; non-core inflation remained low but was lifted by higher administered prices. Most members viewed expected 2026 price shocks from excise tax (IEPS) changes and higher tariffs as one-off and transitory, with potentially affected items estimated at around 2.2% of the CPI basket and pass-through dependent on substitution, margins and demand conditions; the inflation forecast was described as revised up for late 2025 and the following two quarters, while still projecting convergence to the 3% target in the third quarter of 2026. Looking ahead, the Board said it will assess the timing of further rate adjustments based on all inflation determinants to keep the policy rate consistent with an orderly and sustained return of headline inflation to 3%. Several members argued for greater caution and gradualism, particularly in the first half of 2026, while the dissenter called for a pause to recalibrate forecasts and evaluate whether the current stance is sufficient, including the possibility of resuming hikes if convergence appears at risk.