Bank of Mexico Cuts Rate in Split Decision

The split vote, the closest since the easing cycle began, reflects a genuinely complex external environment and sets a considerably higher bar for the next rate cut, according to Finamex Casa de Bolsa's chief economist Víctor Gómez Ayala. The central bank states it will assess the appropriateness and timing for an additional reference rate cut in the future, depending on macroeconomic and financial conditions.

Despite raising its inflation forecasts for the first three quarters of this year, the bank still expects inflation to reach its 3% target in the second quarter of 2027. Mexico's inflation rose to 4.63% in mid-March from 4.02% in February, primarily due to a jump in fresh fruit and vegetable prices, while core inflation slipped to 4.46% from 4.5%.

The Bank of Mexico finds no evidence of second-round inflationary effects from higher taxes on soda and tobacco or increased tariffs on imports. Capital Economics senior emerging markets economist Liam Peach notes the central bank does not seem particularly concerned about the global energy shock's impact on Mexico's inflation outlook and sees scope for further cuts, but is in no rush.

The Mexican government has also lowered taxes on gasoline and reinstated tax relief for diesel to manage domestic fuel prices amid rising global oil prices.