Investing.com -- The Governing Board of Banco de México has announced a reduction in the target for the overnight interbank interest rate by 50 basis points, bringing it to 9.00%. This change will come into effect from March 28, 2025. The decision comes after downward revisions to global economic growth forecasts, including for the US economy. These adjustments are partly due to various announcements on the imposition of tariffs.

In the early part of 2025, inflation showed mixed trends across major advanced economies. The US Federal Reserve, in its latest monetary policy decision, chose to keep its reference rate unchanged. Government interest rates have shown varied performance by region, and the US dollar has depreciated. Global risks, including escalating trade tensions, intensifying geopolitical turmoil and their potential impact on inflation, economic weakening, and financial market volatility, have continued to rise.

Since the last monetary policy decision, Mexico’s government interest rates have decreased across all terms. The Mexican peso has slightly appreciated, despite trading within a broad range. The Mexican economy is anticipated to show signs of weakness in the first quarter of 2025. The ongoing environment of uncertainty and trade tensions presents substantial downward risks.

Headline inflation has reached 3.67% in the first half of March 2025, a level not seen since early 2021. Core inflation was recorded at 3.56% during the same period, slightly below its average level between 2003 and 2019. Expectations for headline inflation at the end of 2025 have decreased, while longer-term expectations remain relatively stable, albeit above target levels.

The Governing Board believes the disinflation process is proceeding well and reiterated that the goal is to bring inflation from its current level, approximately its pre-pandemic historical average, to the 3% target. The Board unanimously decided to lower the target for the overnight interbank interest rate by 50 basis points to 9.00%, considering the current inflationary outlook and the prevailing level of monetary restriction.

Looking ahead, the Board estimates that it could continue adjusting the monetary policy stance in similar magnitudes. It anticipates that the inflationary environment will allow the continuation of the rate-cutting cycle, while maintaining a restrictive stance. The central bank reaffirms its commitment to its primary mandate and the need to continue its efforts to consolidate an environment of low and stable inflation.

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