By Brendan O’Boyle
MEXICO CITY (Reuters) -The Bank of Mexico lowered its benchmark interest rate by 50 basis points for the third consecutive meeting on Thursday, as inflation remains within the bank’s target range but uncertainty persists around trade tensions and a weak economy.
The unanimous decision by the bank’s governing board, which was expected by analysts polled by Reuters, brings Mexico’s benchmark rate to 8.50%, the lowest since August 2022.
In a statement announcing the decision, the Mexican monetary authority said it could consider cutting the rate by a similar magnitude at future meetings.
Headline inflation in Latin America’s No. 2 economy hit 3.93% on an annual basis in April, accelerating from the previous month but still within the central bank’s target range.
Banxico, as Mexico’s central bank is known, targets inflation at 3%, plus or minus a percentage point.
The bank said its board took into account Mexico’s weak economic activity, and also considered trade tensions with the United States, its top trading partner.
“The changes in economic policy by the new U.S. administration have added uncertainty to the forecasts,” Banxico said, warning that U.S. policies could move inflation in either direction.
Analysts polled by Reuters in late April said the uncertainty around U.S. President Donald Trump’s tariffs will likely hurt private spending and investment in Mexico throughout the rest of the year.
Mexico’s gross domestic product expanded just 0.2% in the first quarter, according to official data, allowing the country to narrowly avoid a technical recession. A Reuters poll forecast the same rate of growth for the full year.
For economic growth, “the environment of uncertainty and trade tensions pose significant downward risks,” Banxico said.
The bank’s statement on Thursday announcing its rate decision struck a “growing reluctance to move too quickly,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, pointing out that it mentioned “persistent economic weakness” three times.
But Alberto Ramos, head of Latin America economic research at Goldman Sachs, said Banxico “remains inclined to continue to frontload the rate normalization cycle” and “does not seem to be particularly defensive in the face of external uncertainty.”
Both Abadia and Ramos expect another 50 basis point cut at the bank’s meeting next month.
(Reporting by Brendan O’Boyle; Editing by Emily Green, Daniel Wallis and Richard Chang)
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