Mexico’s central bank board could discuss a rate cut of either 25 or 50 basis points in its next decision in February, Deputy Governor Jonathan Heath told Reuters, even as he warned of growing uncertainty regarding U.S. trade.
(REUTERS).- Heath stipulated that the final decision would depend on the conditions at the time of the meeting.
The monetary authority has been cutting rates by 25 basis points since kicking off an easing cycle earlier this year, but said last week it was open to larger cuts as inflation continues to slow.
But Heath warned that the possibility of tariffs on U.S. imports from Mexico has added uncertainty. In November, President-elect Donald Trump promised to apply a blanket 25% tariff on goods from Mexico if more action is not taken to curb the flow of drugs and migrants into the United States.
“If Trump doesn’t announce a major disruption (in his inauguration speech on) Jan. 20, if inflation is in line with projections and as long as there’s no unanticipated shock, discussion before the February decision could be between cutting the benchmark rate by 25 to 50 basis points,” Heath said in a written response to questions on Monday.
The 70-year-old economist added that the decision depended on factors such as the economic outlook, ratings agencies’ perspectives, and more information on services inflation, which has been sticky.
“Even if the discussion takes place, the larger adjustment is not a given,” Heath said.
But anything larger than a 50-basis-point cut from the current 10% rate would be “completely out of the question,” Heath said.
Even then, the decision from the board may not be unanimous, Heath said, as the other board members differ on the speed and size of rate cuts to bring inflation back within target.
With the current information, the benchmark rate ending 2025 between 8% and 8.5% is “reasonable,” Heath said but warned several factors could influence that.
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