The adjustment of the Central Bank occurs before a good inflation behavior, of 3.74%, which is within the official objective. Analysts estimate that Banxico will continue to make more cuts at the interest rate, to leave it at 7% at the end of the current year.
With this cut, Banxico has reduced its rate by 375 base points since the beginning of 2024 as part of a cycle of readjustments after having taken it to its maximum historical level of 11.25%.
“The margin that will provide the Fed position will allow the Banxico rate to continue approaching neutral territory with bounded risks. As far as we maintain our forecasts of two additional cuts, at a rate of 25 base points in November and December, so the reference interest rate would close the year by 7%,” says Banamex in a report.
How do you affect the cut to the Banxico interest rate?
The cycle of cuts that Banxico has implemented at the interest rate aims to balance two fundamental objectives: maintain inflation under control and stimulate economic activity.
“The gradual reduction of interest rates promotes more favorable financial conditions for investment and consumption, essential elements to revive an economy that has shown signs of weakness,” says Monex Financiero.
For homes and companies, a lower interest rate represents an opportunity for access to less onerous financing, something important in a context of economic weakness. However, the process will be gradual and conditioned on the evolution of macroeconomic indicators.
The economic activity of Mexico contracted 1.2% annual in July, being the primary activities that presented the most pronounced fall, followed by the secondary schools and a rebound of the services at an annual rate.
By 2025, the IMF estimates that the national GDP has an increase of only 1%.
