Mexico's Central Bank Slows Pace of Easing But Signals Further Cuts, Says SocGen

06:59 AM EDT, 08/08/2025 (MT Newswires) -- The Bank of Mexico (Banxico) slowed its pace of easing at Thursday's policy meeting meeting, reducing the policy rate by 25bps to 7.75%, said Societe Generale.

This reflects a cautious approach amid a recent rise in core inflation, while the economy remains weak, wrote the bank in a note to clients.

Banxico signaled the possibility of further cuts, citing ongoing trade uncertainties and downside risks to growth. While core inflation forecasts for H2 2025 were raised, headline inflation projections were lowered, with both still expected to reach target within the policy horizon.

Despite real rates remaining high, the spread over the Federal Reserve has narrowed. Further easing is likely, but the scope may be limited unless the Fed also cuts rates, stated SocGen.

The bank currently expects Banxico's policy rate to be 7.50% in 2025 and 6.75% in 2026, but sees downside risks to both forecasts.

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