Three of Five Banxico Members Open the Door to a Rate Cut
The Banxico minutes reveal that three of five members are opening the discussion on lowering the rate, currently at 6.50%, and what it means for SME credit in Mexico.
Three of the five members of Banco de México's Governing Board opened the door to discussing a cut to the rate, currently at 6.50%, according to the minutes released on October 8 and reported by El Financiero. Annual inflation closed September at 3.45%, within the range of 3% plus or minus one point, according to Banxico.
The minutes correspond to the September 24 decision, when the Board held the rate at 6.50% for the third consecutive time, the level at which it closed its easing cycle, begun in March 2024, in May. The statement from that meeting maintained that Mexico "would not have to react mechanically to the anticipated adjustments to the Federal Reserve's federal funds rate," Bloomberg Línea reported. For an operator in Mexico the point is decoupling: while analysts expect the Fed to raise its rate in December, the market anticipates that Banxico will move in the opposite direction, and that defines the floor on the cost of short-term credit.
The minutes detail the positions. One member considered that "there are elements to discuss the convenience of making a fine downward adjustment to the reference rate," without that anticipating a decision. Another estimated that the monetary stance should remain at current levels for a prolonged period and that the rate differential with the United States will tend to narrow. A third raised discussing a coupling to the Fed's hiking cycle in case inflation does not converge to the 3% target and the exchange rate pressures. Paulina Anciola and Iván Arias, analysts at Banamex, see narrow room and a high probability that in November a cut for December will be anticipated. Several members revised up their growth expectation for the year, to 1.5%.
For an operator, the data leaves two variables on the table: whether the cost of credit begins to ease before the Fed raises its rate, and how it passes through to working capital financing. The next signal comes on November 5.
This note was written with the assistance of artificial intelligence based on verified sources and reviewed by a human editor before publication.