Mexico's Economic Dance: Inflation, Interest Rates, and Uncertainty

Mexican central bank governor Victoria Rodriguez expects further interest rate cuts if inflation remains stable. As Mexico navigates U.S. tariff threats and uncertain growth, Rodriguez warns of economic sluggishness through 2025 despite recent slight economic growth. Banxico's next monetary policy decision is due on May 15.

The governor of the Mexican central bank, Victoria Rodriguez, has indicated that further reductions in the benchmark interest rate are anticipated if inflation remains on course, as forecasted. Rodriguez made these remarks in a written response to Reuters, emphasizing the possibility of continued cuts to the reference rate.

In March, the Bank of Mexico enacted its second consecutive reduction in interest rates, trimming half a percentage point, which brought the benchmark rate to 9.00%—the lowest since September 2022. Rodriguez's statement comes amidst a turbulent period for Mexico, as Latin America's second-largest economy grapples with unpredictability due to fluctuating tariff policies from Washington and decreasing investor confidence.

Recently, Mexico narrowly avoided a technical recession, with a first-quarter growth of 0.2% in 2025, following a 0.6% contraction from the previous quarter. Looking ahead, Rodriguez expressed concern about continuous sluggishness in the Mexican economy through 2025, exacerbated by potential slowdowns in the U.S. economy. Despite this, inflation risks appear mitigated, as headline inflation in April was 3.96%, slightly higher than March but within the bank's target. With Banxico's monetary policy announcement slated for May 15, all eyes are on future economic strategies.

(With inputs from agencies.)