Bank of Mexico Cuts Growth Forecast Amid Trade Worries

Mexico’s central bank has dramatically lowered its economic outlook for 2025, citing growing uncertainty over global trade policy—particularly from the U.S.—as a major drag on business and consumer activity.

Banxico Cuts Growth Forecast and Slashes Interest Rates

The Bank of Mexico (Banxico) revised its 2025 GDP growth forecast from 0.6% down to just 0.1%, as revealed in the minutes of its latest policy meeting. The downgrade reflects concern over weakening economic data and ongoing instability in global trade dynamics.

In an effort to counter slowing growth, Banxico’s board voted unanimously to cut the benchmark interest rate by 50 basis points, dropping it to 9.00%—its lowest level since September 2022. The move is intended to support economic recovery while still keeping inflation under control.

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Trade Tensions Creating Headwinds for Mexico

Board members pointed to shifting international trade policies—especially those from the U.S.—as creating an unpredictable environment for Mexico’s economy. The uncertainty, they noted, is undermining consumer confidence, investment activity, and export stability.

Despite these headwinds, the central bank kept its inflation outlook steady. Banxico still expects inflation to gradually return to its target range of 2% to 4% by Q3 2026, though officials acknowledged that global trade shocks could complicate that trajectory.

Mexico’s Economy in Technical Recession

Mexico slipped into a technical recession in late 2024, after recording back-to-back quarters of negative growth. According to the meeting notes, this economic contraction has only added pressure on policymakers to strike a careful balance between boosting growth and taming inflation.

Banxico has indicated it remains ready to adjust policy further if trade-related volatility continues to disrupt Mexico’s economic stability.

Disclaimer

This article is for informational purposes only and does not constitute investment, financial, or legal advice. Readers should consult professionals before making any financial decisions.
Source: Based on original reporting by Reuters, published May 29, 2025. All rights to original reporting belong to the source.

Source:

Reuters - Bank of Mexico's rate decision marked by trade policy pressures, minutes show