Banxico Makes Its Final Adjustment in 2024 and Sets Interest Rate at 10%

The Bank of Mexico (Banxico) has lowered the benchmark interest rate to 10%, marking its fourth consecutive cut. On Thursday, all members of the Board of Governors voted unanimously in favor of reducing the rate by 25 basis points, as the market had anticipated, due to inflation showing signs of slowing down. According to Banxico, "while the inflation situation requires maintaining a restrictive policy, its evolution suggests that it is appropriate to continue the cycle of cuts and reduce the level of monetary restriction."

Banxico expects the inflationary context to allow for further decreases in the benchmark rate over the coming months. In November, inflation was at 4.55%; however, this figure is still quite far from the central bank's target of 3%. Both general inflation and core inflation are anticipated to follow a downward trend in the future. "The possibility of tariffs being imposed on Mexican imports by the United States has increased the uncertainty in inflation projections," warned the central bank.

Banxico Cuts Amid a Cautious Fed This week, the Federal Reserve (Fed) also decided to lower its interest rate by 25 basis points, bringing it to a range of 4.25% to 4.50%. The Fed has revised its macroeconomic outlook and adjusted its future guidance on monetary policy. It is expected that the U.S. central bank will only implement two additional quarter-point cuts at some point in 2025. In his press conference, Jerome Powell, chairman of the Fed, mentioned that after this latest adjustment, monetary policy becomes less restrictive, and the Committee will need to be more cautious with future adjustments. "If the Federal Reserve tightens its policy, this sets a floor for other central banks in their monetary management. In such a scenario, a wider divergence in rates between the Federal Reserve and the European Central Bank could result in a depreciation of the Euro in the coming months," Intercam added.

Managing interest rates is crucial not only for controlling inflation but also for maintaining a balance in investment and economic growth. The cuts made by Banxico reflect a more flexible and adaptive approach to a changing economic environment, which could stimulate investment in the country if inflation continues to decline. However, it is essential for consumers and investors to stay alert to fluctuations in monetary policy, both locally and internationally, as they can have a significant impact on their financial decisions.