MNI Banxico Preview - August 2025: Easing Pace to Slow

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Executive summary:

• After four consecutive 50bp rate cuts, Banxico’s governing board is widely expected to slow the easing pace in August and deliver a 25bp cut in the overnight rate to 7.75%.
• This would be consistent with signalling at the previous monetary policy meeting that several board members intend to proceed more cautiously with rate cuts ahead amid an increase in core CPI inflation pressures. That said, a persistently weak growth backdrop keeps the door open to further easing. 
• As such, the vote split and forward guidance will remain in focus to determine the potential scale of further rate cuts for the rest of the year.

After delivering another 50bp cut in June, Banxico’s governing board struck a less dovish tone, signalling a slower easing pace ahead. Although the committee still sees significant downside risks to growth, near-term inflation forecasts have risen, and the forward guidance for cuts of a similar magnitude ahead was dropped. The shift came amid a hawkish dissent from Deputy Governor Heath, who voted to remain on hold last month to assess whether the inflation slowdown projections actually materialise in the third quarter.