Banxico's Balancing Act: Navigating Inflation and Interest Rate Strategy

The Bank of Mexico is weighing further reductions in interest rates as inflation remains stable and the U.S. Federal Reserve eases its policies. During a recent policy meeting, the central bank, known as Banxico, cut the benchmark rate to 7.5%, its lowest since May 2022, due to a sluggish economy.

Board member Jonathan Heath opposed the rate cut, expressing concerns over potential inflationary risks from proposed tariffs on Chinese imports, including a 50% duty on cars and a 35% duty on steel and toys. Heath's call for caution reflects a divergence in opinion on the board regarding inflation control strategies.

Recent data indicates core inflation has increased, reaching 4.28% in September, while headline inflation climbed to 3.76%. Despite these challenges, Mexico's President Claudia Sheinbaum supports Banxico's interest rate strategy to balance inflation control and economic growth.

(With inputs from agencies.)