Banxico minutes: Board turns cautious on future rate moves

The Mexican central bank also known as Banxico, revealed the December meeting minutes on Thursday, and cautioned that they will adopt a gradual approach on future monetary policy decisions.

In December, Banxico cut interest rates by 25 basis points to 7% on a 4 to 1 vote split as the Deputy Governor Jonathan Heath voted to hold rates unchanged at 7.25%, arguing that inflation convergence towards the 3% plus or minus 1% remains uncertain, and noted that core inflation trend is still rising.

The board’s majority justified its decision based on a strong Peso, a weak economy and the recent progress on inflation. However, it turned cautious due to new taxes and tariff increases on imports into Mexico, exerting upwards pressure on prices.

Mexico imposed 50% tariffs on Chinese and other Asian countries, with which it does not have a trade agreement, aimed at boosting local industry, while also complying with US President Donald Trump demands to fortify the relations of the three north American countries.

Despite this, governors see the inflationary effects as temporary, but some flagged caution is required in case the effects put longer-term pressure on prices.

Regarding the economy, the minutes cited that economic activity remained weak in Q4 2025, and that GDP contracted -0.29% QoQ in Q3 2025.