Banxico's Bold Move: Interest Rate Slash Amid Economic Uncertainty

The Bank of Mexico, commonly referred to as Banxico, slashed its benchmark interest rate to 7.5% on Thursday. The decision, marking the lowest rate since May 2022, was made amidst persistent concerns over sluggish growth and global trade tensions.

Despite the market's expectations, the vote to cut the rate by 25 basis points highlighted division within the bank, as Deputy Governor Jonathan Heath stood alone in advocating for holding the rate at 7.75%. This cautious quarter-point cut, as opposed to larger cuts seen earlier this year, reflects ongoing concerns about inflation pressure.

The central bank emphasized its dual challenge of combating rising core inflation while aiming to stimulate Mexico's economy. Recent data showed annual core inflation rising to 4.26% in September, with a headline inflation rate of 3.74%. Notable market analysts anticipate further rate cuts, though concerns over inflation persist.