By Natalia Siniawski and Emily Green
MEXICO CITY (Reuters) -The Bank of Mexico cited stable inflation, a sluggish economy and an easing U.S. Federal Reserve policy in signaling further interest rate cuts, according to minutes from its latest policy meeting released on Thursday.
The minutes highlight the stances of the five-member board during its September 25 decision to cut its benchmark interest rate by 25 basis points to 7.5%, its lowest level since May 2022.
Banxico, as the central bank is known, said it also weighed the behavior of the exchange rate and the possible effects of shifts in global trade policies.
Deputy Governor Jonathan Heath, the sole member of the board to vote against cutting the interest rate, highlighted the inflationary risks that could result from Mexico’s proposed tariffs on Chinese imports, according to the minutes.
The proposed tariffs include a 50% duty on cars from China and other Asian countries, as well as a 35% tariff on steel, toys and motorcycles.
“I call once again to proceed with caution,” Heath said.
While core inflation remains above the bank’s target range of 3% plus or minus a percentage point, most Banxico members said it was relatively stable.
“Most members highlighted that, in recent readings, inflation has remained below its historical average and has shown a stable behavior,” according to the minutes.
Mexico’s statistics agency released new inflationary data on Thursday, showing that annual headline inflation climbed to 3.76% in the year through September, from 3.57% in August.
Core inflation, which is considered a more reliable gauge of price trends because it strips out volatile food and energy prices, also quickened in September, reaching 4.28%.
In an updated forecast released on Oct. 1, private sector analysts polled by Banxico raised their projection for year-end core inflation to 4.18%, up from 4.11%. However, the analysts lowered their forecast for headline inflation to 3.85%, down from 3.97%.
Banxico is facing a dual challenge as it seeks to keep inflation down, while also spurring economic growth through lower interest rates. Mexico’s President Claudia Sheinbaum has expressed support for Banxico’s interest rate cuts.
(Reporting by Natalia Siniawski and Emily Green; Editing by Aurora Ellis)
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