Bank of Mexico's Smaller Rate Cut Strategy Signals Gradual Approach

The Bank of Mexico is set to adopt a more gradual approach to interest rate cuts, following its streak of significant reductions. The central bank's June minutes reveal that future cuts are likely to be smaller, with some board members advocating for more cautious monetary policy decisions.

The Bank of Mexico is shifting to a more cautious approach in its monetary policy decisions, suggesting future interest rate cuts will be smaller. This comes after a series of substantial reductions totaling 325 basis points since early 2024. The details were unveiled in the central bank's June minutes, released on Thursday.

In June, the bank executed its fourth consecutive 50-basis point rate cut. However, the latest minutes indicate a pivot away from such substantial adjustments. At least two board members believe this should be the last significant reduction, emphasizing the need for careful evaluation of additional cuts.

One of the governing members mentioned that the current monetary stance is apt for tackling inflation risks. Banxico, as the bank is nicknamed, has seen inflation decline from its 2022 peaks, justifying the more reserved stance on future rate reductions.

(With inputs from agencies.)