MNI Banxico Preview - Sep 2025: 25bp Easing Pace to Continue

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Executive Summary

• After slowing the easing pace in August, the Banxico committee is expected to deliver another 25bp rate reduction, taking the overnight target rate to 7.5%.
• After dissenting in favour of a rate hold at the two previous meetings, there will be the usual attention on Deputy Governor Heath’s vote, as he continues to focus his rhetoric around the stalling of progress on core disinflation.
• Separately, the continued appreciation of the Mexican peso and the Fed back in easing mode bolster the likelihood of the committee maintaining its guidance in assessing further adjustments to the reference rate ahead.

Domestic activity indicators have remained weak since the August MPC meeting, particularly on the investment side, while core inflation has held above the ceiling of the central bank’s 2-4% target range. Despite the persistence of core inflation, however, Banxico Governor Rodriguez has continued to strike a dovish tone, noting after the publication of the recent quarterly inflation report that growth is expected to remain low for the rest of this year, only followed by a gradual expansion through 2026. The central bank now sees real GDP rising by 0.6% this year (vs. 0.1% previously) and 1.1% in 2026 (vs. 0.9%). 

Meanwhile, Deputy Governor Omar Mejia explicitly said that space still exists to continue the easing cycle, while even the more hawkish Deputy Governor Heath said that although recession risks have been put at bay, growth needs to be much stronger going forward. Importantly, the resumption of the Fed’s easing cycle last week also gives the Banxico committee more space to continue with its own sequence of rate cuts beyond the widely anticipated move this week.