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2025-08-01 19:02:36
With a slowing economy and stubborn inflation, is an August rate cut by the Bank of Mexico a foregone conclusion? ⑴ A Reuters poll shows that the Bank of Mexico is expected to cut its key interest rate by 25 basis points to 7.75% on August 7. ⑵ If the forecast comes true, this would be the bank's tenth rate cut since the start of its easing cycle in March last year, bringing the rate to its lowest level since June 2022. ⑶ Although inflation in Mexico slowed in the first half of the year, core inflation, excluding volatile food and energy prices, remained stubbornly high. ⑷ Deutsche Bank analysts noted that while most policymakers are likely to support a rate cut due to declining overall inflation, some officials have expressed concerns about the stickiness of core inflation. ⑸ The Bank of Mexico's rate cut comes as Trump agreed to maintain a 90-day tariff suspension on Mexican goods to allow for trade negotiations. ⑹ In addition, slower-than-expected economic growth in Mexico also supports the central bank's rate cut. ⑺ Although a rate cut seems to be a foregone conclusion, the mixed outlook for inflation and economic growth may prompt the central bank to adopt a more cautious strategy of a smaller rate cut of 25 basis points.
