Mexico's Central Bank Signals Extended Pause on Rate Cuts

Bank of Mexico Deputy Governor Jonathan Heath has indicated that the central bank will likely hold interest rates steady for an extended period, with any potential cut possibly a year away. In an interview released Wednesday as part of a podcast by Banco Banorte, Heath said the current stance is appropriate, even as headline inflation moves closer to the official target.

Heath explained that the central bank could only consider lowering rates again if inflation consistently converges toward the 3% target, with that improvement supported by core inflation readings. "If we get inflation that is supported by core inflation very close to 3%, that would allow us later on ... to think about perhaps lowering the rate a little more," he said, adding that this could happen "perhaps in a year."

While recent disinflation progress ranks among Mexico's best readings since before the pandemic, Heath cautioned against declaring victory prematurely. He noted that the drop in headline inflation has been driven mainly by volatile non-core components, which are less influenced by monetary policy.

Heath identified sticky services inflation as the primary upside risk and pointed out that medium- and long-term inflation expectations are not yet fully aligned with the central bank's target. He also said policymakers could revisit their stance if inflation rises again, progress stalls, or external conditions—including actions by the U.S. Federal Reserve—complicate the outlook.