Mexico central bank expects further rate cuts, governor says

By Emily Green

May 7 (Reuters) - Mexican central bank governor Victoria Rodriguez expects further cuts to the benchmark interest rate if inflation holds steady as expected, she told Reuters.

"We foresee that the inflationary environment will allow us to continue with the cycle of cuts to the reference rate," Rodriguez said in a written response to questions sent late on Tuesday.

In March, the Bank of Mexico delivered its second-consecutive interest rate cut of half a percentage point, bringing the benchmark rate to 9.00%, its lowest level since September 2022.

Mexico, Latin America's no. 2 economy, has been plagued by uncertainty in recent months as a result of Washington's on-again, off-again tariff threats and a related drop in investor confidence.

The country narrowly avoided a technical recession after its economy grew 0.2% in the first quarter of 2025, according to Mexico's national statistics institute, compared to a 0.6% contraction the previous quarter.

The uncertain business environment and a potential U.S. slowdown suggest that Mexico's economy could remain sluggish through 2025, Rodriguez cautioned.

"While it is positive that growth was reported in this period, it was low, so the weakness of the Mexican economy persists," she said, adding that the slowdown offsets the inflationary risk of currency depreciation.

Mexico's headline inflation was 3.96% in the first half of April, Rodriguez said, up slightly from March but within the bank's target range of 3% plus or minus a percentage point.

Banxico, as the central bank is known, will announce its next monetary policy decision on May 15.