Banxico eyes more interest-rate cuts, but board members caution against haste

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Banxico says further rate cuts are on the table at next meetings

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Board members highlighted volatility from global events

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Members invite caution, one urged avoiding Brazil rates U-turn

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Two members open to discussing deeper interest-rate cuts

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Another cut likely at December meeting, says economist

(Adds board member views in paragraph 13 and Goldman Sachs comment in paragraphs 14-15)

By Brendan O'Boyle

MEXICO CITY, Nov 28 (Reuters) - The Bank of Mexico's five-member governing board expects easing inflation could open the door to further interest-rate cuts, but cautioned against moving too quickly, minutes from the bank's latest monetary policy meeting showed on Thursday.

Banxico, as the Mexican central bank is known, lowered its benchmark interest rate by 25 basis points to 10.25% in a unanimous decision by its governing board, which was announced on Nov. 14.

Annual headline inflation slowed more than expected in the first half of November, falling to 4.56% from 4.69% in the previous month, fueling bets that another rate cut is likely at Banxico's Dec. 19 meeting.

Banxico targets inflation at 3%, plus or minus a percentage point.

Mexico's closely monitored core consumer price index, seen as a better gauge of price trends because it strips out volatile energy and food prices, came in below forecasts at an annual 3.58%.

Banxico's board held its monetary policy meeting just over a week after President-elect Donald Trump's election victory in the United States, with most members mentioning that uncertainty around the U.S. vote fueled volatility in global financial markets, according to the minutes.

One board member noted that multiple events, including the election, have affected the behavior of financial variables and economic indicators, including price dynamics.

"This has required greater caution in the conduct of monetary policy compared to the beginning of other previous cycles," the board member said.

Banxico started an easing cycle this year and has cut its benchmark rate four times amid falling inflation, although the governing board has taken a more cautious approach than some of its regional counterparts, opting to hold the key rate at two meetings following an initial cut in March.

One board member echoed calls for patience, citing the recent experience in Brazil, where that country's central bank has begun hiking borrowing costs again in response to accelerating inflation, reversing an interest-rate cutting cycle it had started.

The Brazilian central bank kicked off rate cuts back in August 2023, bringing its target Selic interest rate down quickly by 325 bps by May, but was tightening again by September 2024.

"Calibrating the magnitude and the pace of rate cuts is crucial to avoid an aggressive or premature easing before inflation is consolidated around the target, rather than just within the variability range," that board member, whom the minutes did not identify, said.

Despite the hawkish warning, the minutes showed that two of the bank's five members were open to discussing larger rate cuts at upcoming meetings, citing progress on inflation.

Alberto Ramos, chief Latin America economist at Goldman Sachs, expects the board to enact a 25-bps cut at its December meeting, but sees it unlikely the board will accelerate the pace of cuts to 50 bps.

Ramos cited heightened domestic and external uncertainty as holding the board back from deeper cuts, "in particular around the U.S.-Mexico bilateral agenda." (Reporting by Brendan O'Boyle Editing by Anthony Esposito, Frances Kerry and Rod Nickel)