Bank of Mexico lowers 2025 growth forecast, raises inflation estimates for early 2026

By Brendan O'Boyle

MEXICO CITY, Nov 26 (Reuters) -

The Bank of Mexico cut its growth forecast for Mexico's economy to close to zero on Wednesday, amid bets by the bank's board that the country's weak economy will help bring sticky inflation to target. In its third quarter report published on Wednesday, the bank forecast the gross domestic product of Latin America's second largest economy growing just 0.3% this year, down from its 0.6% forecast last quarter. The bank maintained its forecast for a 1.1% growth rate next year. The bank in its report also slightly raised its projections for average annual core inflation for the fourth quarter of 2025 and the first two quarters of 2026. It similarly raised slightly its forecasts for general inflation for the first two quarters of 2026.

But Banxico, as the central bank is known, said it still projects headline and core inflation to meet the bank's 3% target by the third quarter of 2026.

Banxico has cut its benchmark rate by four percentage points since embarking on a monetary easing cycle early last year. On November 6, the bank's board made its eleventh consecutive cut, bringing the rate down 25 basis points to 7.25%, its lowest since May 2022. The majority of the bank's five-member board this month justified the reduction in part by pointing to the bank's success in bringing headline inflation within one percentage point of the bank's 3% target. Annual headline inflation was 3.61% in the first half of November.

The board also highlighted the weakness of Mexico's economy, which some members say is likely to continue to exert downward pressures on inflation. (Reporting by Brendan O'Boyle; Editing by Emily Green)