Market Analysts Predict Continued Rate Cuts by Banxico
According to a survey conducted by Citi among 37 market analysts, the majority anticipate that Banco de México (Banxico) will continue its cycle of rate reductions, bringing the reference rate down to 7% by the end of this year and extending it into 2026, leaving it at around 6.50%.
These predictions include a forecast for another 25-point reduction in the rate for the upcoming monetary policy decision scheduled for this Thursday.
Divided Opinions on Rate Cut Pauses
While the average of the responses suggests continuous rate cuts, there is no consensus on the pauses that analysts believe the Banxico Governing Board will implement to fine-tune rate adjustments.
Among the 37 participants, only Barclays considers the possibility that the Banxico Governing Board will temporarily halt the rate cut cycle in their November decision, resuming it for the final announcement of the year on December 18.
If the analysts’ average prediction holds, the rate would be at 7.25% during the penultimate monetary decision of the year, scheduled for this Thursday. This would mark the third consecutive quarter-point reduction in a cycle comprising thirteen cuts since March 21, 2024.
Four of the 37 interviewees, including economists from Banca Mifel, Banco Base, HSBC, and Oxford Economics, anticipate that Banxico will interrupt the rate cut cycle in December, projecting an end-of-year rate of 7.25%.
Several analysts have explained that reaching a nominal rate of 7.25% would effectively dismantle the restrictive policy maintained for over 24 months by Banxico.
Rate Cuts Expected to Continue in 2025
The consensus among the analysts consulted by Citi is that the Banxico Governing Board will continue reducing the rate next year, aiming for a level of 6.50%.
However, 11 out of the 37 interviewees disagree with this prediction. Santander, for instance, expects the rate to stabilize at 7%, implying just one 25-point reduction for the entire year. In contrast, five of these dissenting analysts project a rate of 6.75% by the end of the year, expecting only two quarter-point reductions or one 50-point cut.
Four others, including Citi, Epicurus Investments, Oxford Economics, and XP Investments, anticipate a rate of 6.25%. Meanwhile, Bank of America projects further reductions, bringing the rate down to 6%, which would imply an additional 100-point cut.
Discrepancies Rooted in Economic Indicators
Inflation and GDP: The Context Behind the Disagreements
The context of Mexico’s Gross Domestic Product (GDP) and inflation significantly contributes to the differences in projections among experts.
The average expert prediction for general inflation at the end of 2025 is 3.80%, down from 3.90% projected just fifteen days ago. They anticipate underlying inflation, which excludes more volatile price fluctuations, to reach 4.20%.
For the following year, the average expected inflation rate has risen to 3.90% from 3.80% in the previous survey. For underlying inflation, which Banxico focuses on for monetary decisions, they project 3.80%.
The estimated GDP for the end of this year ranges from -0.1%, as projected by Valmex and Scotiabank, to 0.7%, anticipated by BBVA, Barclays, HSBC, and Morgan Stanley. For the next year, analysts predict a 1.4% GDP growth rate.
