Deutsche Bank Says Mexico's Central Bank Likely to Cut Rates

12:57 PM EDT, 03/25/2026 (MT Newswires) -- Mexico's March H1 headline inflation reading came in above expectations, driven by perishable foodstuffs and air transportation due to the upcoming Easter holidays, said Deutsche Bank.

On the other hand, core inflation came in well aligned with expectations, easing slightly at an annual rate, wrote the bank in a note to clients.

The stability of fuel prices enabled by the fiscal response to the oil shock allowed gasoline & oil to log a 0.18% biweekly increase, which still implied a 1% decrease year over year.

Within the core component, the annual rate of the subcomponent affected by the new taxes; processed foods, beverages and tobacco, decelerated while the other core subcomponents remained broadly stable.

On the activity front, the January print undershot expectations and the previous month was also revised to the downside, pointed out Deutsche Bank. All three main sectors of the economy shrank in January.

In the bank's view, Mexico's central bank (Banxico) will be able to argue that the impact of the tax/tariff shock from January has faded, the pressures of the energy shock have been muted so far via fiscal policy, and the economy continues to operate with slack.

Deutsche Bank remains of the view that unless externals deteriorate materially by late Wednesday, when the policy decision will be made, then Banxico's dovish majority will likely deliver a 25bps rate cut.

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