- Banxico sees Q4 2024 GDP contraction, with 2024 growth slowing to 1.5%.
- Inflation falls to 3.69%, within Banxico’s 2-4% target range.
- Most members anticipate further inflation decline, keeping the rate-cut path open.
Banco de Mexico, also known as Banxico, revealed its monetary policy minutes for the decision announced on February 6. The central bank decided to lower borrowing costs by 50 basis points (bps) to 9.50% via a 4 to 1 vote split, with Deputy Governor Jonathan Heath supporting a 25 bps rate cut.
Key highlights
All members pointed out that the weakness of the Mexican economy intensified in the fourth quarter of 2024.
Most members stated that, according to the flash estimate, GDP contracted with respect to the previous quarter. They highlighted that annual GDP growth would have been 1.5% in 2024 as a whole, in contrast to the growth above 3% in each of the previous two years.
Most members indicated that investment slowed down markedly in 2024.
The majority anticipated that the Mexican economy will continue growing at low rates in 2025.
Some members mentioned that the balance of risks to growth is biased to the downside.
Most members agreed that a possible impact on trade flows between Mexico and the United States would result in a decline in Mexican economic activity.
All members agreed that there has been a significant progress in resolving the inflationary episode derived from the shocks of the pandemic and the war in Ukraine.
Most members pointed out that the behavior of core inflation reflects the progress attained. They commented that the inflationary outlook seems more favorable than in the most critical moments of the inflationary episode.
Most members noted that since the last monetary policy meeting, headline inflation decreased to 3.69% in the first fortnight of January 2025.
Most members highlighted that headline inflation returned to the 2-4% variability range for the first time since then.
Another member added that annual headline inflation has declined 501 basis points since the peak of the current inflationary episode. One member asserted that, nevertheless, it remains above target.
Most members stated that the most recent decline in headline inflation was associated with the significant reduction in noncore inflation.
The majority noted that in its most recent reading core inflation reached 3.72%. They commented that it has been below 4% for four and a half months.
Most members emphasized the importance of the expectations channel in the transmission of monetary policy. They highlighted that these have remained anchored despite the complexity of the recent inflationary episode. They asserted that this is the result of Banco de México's firm response.
Most members mentioned that inflation is expected to continue declining as previously anticipated.
Banxico FAQs
The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.
The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD flirts with this year highs as USD resumes slide
The Australian Dollar surged against its American rival approaching the yearly high of 0.6437. The cautious tone of equities was not enough to help the Greenback, weighed by trade tensions between the US and China.
Gold extends gains towards $3,350
Gold price slowly advanced on Monday, starting the new day just ahead of the $3,350 amid broad US Dollar weakness. Caution kept market activity limited ahead of first-tier data releases next Wednesday.
EUR/USD extends gains beyond 1.1400 amid renewed USD weakness
EUR/USD hovers around 1.1420 early on Tuesday, regaining the upside amid concerns about global economic progress within the ongoing trade war between Washington and Beijing. European and US growth in the eye of the storm.
This is a big data week
This is a big data week, with Q1 GBP at midweek plus the employment cost data. The Atlanta Fed bravely delivers its GDPNow ahead of the official data, on Tuesday. Last week it was -2.5%, but adjusted for gold, -0.4%. A minus either way.
Week ahead: US GDP, inflation and jobs in focus amid tariff mess – BoJ meets
Barrage of US data to shed light on US economy as tariff war heats up. GDP, PCE inflation and nonfarm payrolls reports to headline the week. Bank of Japan to hold rates but may downgrade growth outlook. Eurozone and Australian CPI also on the agenda, Canadians go to the polls.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.