Mexico central bank cuts interest rate but flags trade tensions, weak economy
MEXICO CITY, May 15 (Reuters) - The Bank of Mexico lowered its benchmark interest rate by 50 basis points for the third consecutive meeting on Thursday, as inflation remains within the bank's target range but uncertainty persists around trade tensions and a weak economy.
The unanimous decision by the bank's governing board, which was expected by analysts polled by Reuters, brings Mexico's benchmark rate to 8.50%, its lowest level since August 2022.
In a statement announcing the decision, the Mexican monetary authority said it could consider cutting the rate by a similar magnitude at future meetings.
The decision comes days after official data showed headline inflation in Latin America's no. 2 economy hit 3.93% on an annual basis in April, accelerating from the previous month but still within the central bank's target range.
Banxico, as Mexico's central bank is known, targets inflation at 3%, plus or minus a percentage point.
The bank said its board took into account Mexico's weak economic activity, "as well as the possible changes in trade policies worldwide."
Banxico upheld its expectation that inflation will converge to its 3% target in the third quarter of 2026, but flagged risks from trade tensions with the United States, its top trading partner.
"The changes in economic policy by the new U.S. administration have added uncertainty to the forecasts," Banxico said, warning that U.S. policies could move inflation in either direction.
Analysts polled by Reuters in late April said the uncertainty around U.S. President Donald Trump's tariffs will likely hurt private spending and investment in Mexico throughout the rest of the year.
Mexico's gross domestic product expanded just 0.2% in the first quarter of 2025, according to official data, allowing the country to narrowly avoid a technical recession. A Reuters poll forecast the same rate of growth for the full year.
For economic growth, "the environment of uncertainty and trade tensions poses significant downward risks," Banxico said.
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