Market Consensus Anticipates 25 Basis Point Cut
According to the results of Citi’s 2025 survey, market participants predict a 25 basis point (bp) cut in the final monetary decision of the year, which would take the rate to 7%, as reported.
Out of the 33 participants, all anticipate Banco de México (Banxico) will reduce the rate by 25 bps in today’s decision, marking the fourth consecutive cut of this magnitude out of eight adjustments made this year.
GDP Growth and Neutrality
By the end of 2026, participants maintained their forecast that Banxico will continue moving towards neutrality by setting the rate at 6.50%, which would be the third year of monetary easing and the fewest cuts since the rate calibration cycle began.
If their predictions are accurate, it would mean an accumulated cut of 50 bps throughout the year. For comparison, in the first survey of the year, panelists expected the rate to end at 8.35%, indicating no conditions for anticipating that Banxico would bring the rate to a neutral level like the one seen in November’s decision.
Experts explain that monetary neutrality implies no active restriction of economic activity or inflation control. Inflation is expected to be at 3.91% for this year, with a GDP growth rate of 0.4%, according to the survey results.
Inflation and GDP Projections
Of the 33 participants, eight believe inflation will end within the maximum variability range of 4% or above, with a high of 4.01-4.09%, which is only expected by Finamex.
The average prediction includes a second quinquennial upward correction that has just begun, starting from the 3.91% projected in January. This is precisely the same level projected at the beginning of the year.
For this year’s GDP, participants project it to be 0.4%, the same rate they expected at the start of December, which interrupted a six-week streak of forecasting 0.5% growth.
Banxico’s governing board members have explained that the output gap and its negative position are crucial factors in their monetary decision-making process.
With this anticipated context, it is understood that Banxico will set the rate at a neutral level, indicating that conditions are not favorable for monetary policy to bring inflation precisely to the target.
Key Questions and Answers
- Q: What is the expected rate after Banxico’s final decision of the year? A: The rate is projected to reach 7%.
- Q: How many cuts has Banxico made this year, and what is the magnitude of each? A: Banxico has made eight cuts this year, each of 25 basis points.
- Q: What is the projected GDP growth for 2026? A: The GDP growth is expected to be 1.2%.
- Q: What is the anticipated inflation rate for 2025? A: Inflation is expected to be around 3.91%.
- Q: Why is Banxico adjusting the rate to a neutral level? A: Banxico is adjusting the rate due to the negative output gap and its position, indicating that conditions are not favorable for monetary policy to bring inflation precisely to the target.
