Mexican Peso Ends Flat Against the Dollar After Banxico Rate Cut
On the domestic front, Mexico’s retail sales rose 0.4% month over month in October, after remaining flat in September.
Quick overview
- The Bank of Mexico (Banxico) cut its benchmark interest rate by 25 basis points to 7%, marking its twelfth consecutive reduction.
- The Mexican peso showed minimal changes against the U.S. dollar, closing at 18.0032 pesos per dollar.
- Banxico highlighted concerns over weak economic growth and potential inflationary pressures while leaving the door open for further rate cuts.
- In the U.S., consumer prices rose less than expected, while Mexico's retail sales increased by 0.4% month over month in October.
The widely anticipated rate cut left markets largely unmoved, shifting attention to the central bank’s outlook for next year.
The Mexican peso finished Thursday’s session with minimal changes against the U.S. dollar. The local currency edged slightly higher as markets digested economic data from Mexico and the United States, while focusing on a well-telegraphed interest rate cut by the Bank of Mexico (Banxico).
The exchange rate closed at 18.0032 pesos per dollar, compared with 18.0154 in the previous session, according to official Banxico data. This represented a modest gain of 1.22 centavos, or 0.07%.
During the session, the dollar traded within a range of 18.0243 at the high and 17.9609 at the low. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.04% to 98.44.
Banxico Cuts Rates Again
Banxico announced a 25-basis-point cut to its benchmark interest rate, its twelfth consecutive reduction, bringing the rate to 7%. The move was widely priced in by markets. The decision was split, with four board members voting in favor of the cut and one—Jonathan Heath—voting to keep rates unchanged.
Looking ahead, policymakers left the door open to further easing, while stressing that future decisions will depend on factors that could reignite inflationary pressures.
The central bank highlighted the peso’s appreciation since its previous meeting and warned of weak economic growth, citing uncertainty and ongoing trade tensions as “significant downside risks.”
On inflation, Banxico noted that headline inflation rose from 3.63% in early October to 3.80% in November, while core inflation increased from 4.24% to 4.43%, driven mainly by non-food goods. However, inflation expectations for 2025 declined.
Overall, Banxico deemed it appropriate to continue the rate-cutting cycle, taking into account the inflation outlook, the stronger peso, subdued economic activity, and potential impacts from changes in trade policy.
Economic Data in Focus
In the United States, consumer prices rose less than expected in the year through November. However, the Bureau of Labor Statistics did not release monthly inflation figures due to disruptions caused by a prolonged government shutdown.
On the domestic front, Mexico’s retail sales rose 0.4% month over month in October, after remaining flat in September, and posted an annual increase of 3.5%. This marked the tenth consecutive month of year-over-year growth.
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