Next week’s monetary policy statement is expected to reinforce a cautious tone, as concerns about weak economic conditions are offset by higher inflation risks amid a still uncertain trade outlook.
This would place Banco de México (Banxico) in a trajectory similar to that of the United States Federal Reserve (Fed), which cut interest rates this week, but noted that the bar is high for further easing in the short term.
Banxico’s five-member board plans to cut the benchmark rate by a quarter of a percentage point, from 7.25% to 7.00%, at its Dec. 18 meeting, according to the 29 economists surveyed Dec. 8-11.
Inflationary pressures
“Despite persistent inflationary pressures, we still expect a 25 basis point cut at the Banxico meeting on December 18. However, these pressures, the January health taxes and the possible tariff transfer increase the likelihood of a pause in February,” Morgan Stanley analysts noted.
In November, Banxico cut its growth forecast for the Mexican economy in 2025 to almost zero and left unchanged an estimate of a slow 1.1% expansion for next year.
He also reiterated the prediction that inflation would reach the 3% target for the second half of next year, but slightly raised forecasts for consumer price increases for some future periods.
In November, the annual inflation rate accelerated more than expected, reaching 3.80%, in the face of a warning from a member of Banxico’s governing board about additional risks for next year.
Another monetary policy official, Jonathan Heath, has been more forceful, stating that Banxico’s forecasts faced a “credibility crisis” given the unlikelihood of reaching the 3% inflation goal in just a few months.
Pause at the beginning of 2026?
Of a total of 21 participants who presented quarterly forecasts, 10 considered that Banxico’s rate would remain stable at 7.00% at the end of the January-March period, while seven placed it at 6.50% and four at 6.75%, which gives a median of 6.75%.
This contrasted with the November survey, when fewer economists (seven of 19) predicted the monetary authority would maintain or raise rates in the first quarter from 7.00% in December 2025, with a consensus estimate of 6.75%.
In the latest survey, of 21 economists who answered an additional question about Banxico’s next measure after this month’s decision, nine predicted a cut in February, two in March and the other 10 in different months of 2026.
“By 2026 we expect a pause in Banxico in the first quarter to analyze price pressures from the imposition of tariffs and taxes,” said Iván Arias, an economist at Banamex.
“And that they resume with a couple of cuts in May and June to reach a terminal rate of 6.50%,” he added.
