Banxico Cuts Benchmark Rate to 7.50%, Testing the Balance Between Inflation and Growth

Yesterday, the Bank of Mexico (Banxico) lowered the interbank interest rate by 25 basis points to 7.50% in its sixth monetary policy decision of 2025. This level, the lowest in Mexico since mid-2022, signals a shift toward less restrictive financial conditions.

With this move, the central bank has cut a total of 250 basis points so far this year, in line with the recent easing by the U.S. Federal Reserve, which on September 17 delivered its first cut in nine months, bringing its range to 4%–4.25%.

Banxico’s Governing Board cautioned that the reduction does not mean inflation risks have disappeared.

From July to the first half of September, headline inflation ticked up from 3.51% to 3.74%, and core inflation from 4.23% to 4.26%, with the risk balance still tilted to the upside—though less so than in prior years.

In this context, the bank stated that upcoming decisions will depend on the path of prices and the exchange rate, which could be affected by a narrower rate differential with the United States. The ex-ante real rate, however, remains in positive territory, indicating that even after accounting for expected inflation, the 7.50% yield preserves the purchasing power of savings and keeps monetary policy in restrictive territory.

For commercial real estate—including industrial warehouses, offices, and shopping centers—the lower policy rate provides immediate relief in financing costs, thereby facilitating liability refinancing and improving the viability of new projects, although the impact on valuations and cap rates will be gradual. The cut, however, is not risk-free: a narrower rate differential could pressure the peso and reignite inflation pressures, which could force the bank to slow the pace of future cuts.

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