Bank of Mexico sees recession possibility, halves 2025 growth view

Updates throughout with possibility of recession, adds context on U.S. tariff threat

By Anthony Esposito

MEXICO CITY, Feb 19 (Reuters) - The Bank of Mexico on Wednesday halved its growth forecast for the Mexican economy this year and even sees a possibility it will slide into a recession, contracting by as much as 0.2%.

It said Latin America's second-largest economy is now forecast to grow just 0.6% this year, from 1.2% previously, and also said it now expects inflation to take longer to ease to its target of 3.0%.

"The economy could slow down even further in 2025, in an environment in which high uncertainty due to internal and external factors," it said.

It called the Trump administration's actions on migration, trade and other areas "an important" challenge for Mexican growth projections but added domestic factors were also boosting uncertainty.

Banxico, as the central bank is known, also forecast annual headline inflation for the fourth quarter of 3.3%, versus a prior projection of 3%.

While some analysts consider core inflation, which excludes volatile energy and food prices, as more reliable, the bank sees it running at the same 3.3% pace in the year's final quarter.

Still, Banxico said the inflationary environment would likely permit it to continue cutting the benchmark interest rate.

Earlier this month, Banxico cut the key interest rate by 50 basis points, saying it could cut by a similar magnitude in the future as inflation cools and after the economy contracted slightly late last year.