**BANXICO Implements Fifth Rate Cut of the Year, Setting Interbank Interest Rate at 10%**
The Mexican central bank, known as BANXICO, has made its fifth rate cut of the year, reducing the benchmark interest rate by 25 basis points to 10%. This decision was announced during the last monetary policy meeting of the year on December 19, 2024. Initiated in March 2024, this cycle of rate reduction has resulted in a cumulative decrease of 125 basis points over the year. Consequently, the borrowing cost is now at its lowest level in two years.
According to BANXICO, global economic activity likely maintained its growth pace in the last quarter of 2024. The U.S. economy continues to expand, and the global disinflationary process has progressed. However, inflation has recently increased in most major advanced economies, despite the latest decision by the U.S. Federal Reserve to cut its benchmark rate by 25 basis points. This has led to a depreciation of government interest rates and an appreciation of the U.S. dollar.
BANXICO highlighted several global risks, including possible policies reversing global economic integration, worsening geopolitical tensions, prolonged inflationary pressures, and greater financial market volatility.
In Mexico, government short-term interest rates have decreased, but medium and long-term rates have shown upward movements. The Mexican currency appreciated after a phase of depreciation due to possible measures that might weaken economic integration with the country’s main trading partner.
The central bank expects muted economic activity by the end of 2024 and into the following year, especially as employment growth has decelerated. It also reported a decline in general inflation, moving from 4.76% to 4.55% between October and November, and a continued downward trend in core inflation.
Despite low consumer goods inflation, services inflation has seen only a moderate reduction. Inflation expectations for the end of 2024 have decreased, while those for 2025 remain stable but are above target. Core services inflation shows greater persistence, resulting in revised inflation forecasts.
The bank aims for inflation to reach its target by the third quarter of 2026. Additionally, the implementation of potential tariffs on U.S.-Mexico imports remains a variable that might influence inflation forecasts.
The central bank emphasized that its actions will maintain the benchmark interest rate in line with the necessary trajectory to ensure a steady convergence of general inflation to the 3% target over the projected period.
**Secondary Article: Global Economic Outlook and Monetary Policies**
As 2024 draws to a close, central banks around the globe are reevaluating their monetary policies in light of shifting economic conditions. The recent decision by Mexico’s central bank, BANXICO, to cut interest rates highlights a trend of cautious optimism amid ongoing inflationary pressures.
In the United States, the Federal Reserve’s decision to lower interest rates indicates a strategic move to stimulate economic growth amid signs of slowing momentum. The Bank of England and European Central Bank have also signaled potential adjustments in their own policies, aiming to balance inflation control with growth support.
Globally, geopolitical tensions continue to affect economic stability, with conflicts and trade disagreements contributing to uncertainty. Central banks are navigating these challenges by cautiously easing monetary policies while remaining vigilant of mounting inflationary risks.
As nations look forward to 2025, the focus remains on fostering economic recovery and managing inflation. Monetary authorities worldwide are expected to continue monitoring global economic indicators closely, adjusting their strategies to support sustainable growth and financial stability.