POLL-Mexico's central bank to cut rates by 25 basis points to 7.75% on August 7

By Gabriel Burin

BUENOS AIRES, Aug 1 (Reuters) - Mexico's central bank will cut its key interest rate by 25 basis points to the lowest in three years on August 7, a Reuters poll showed, amid signs of disinflation and a slower economy.

Still, some policymakers at Bank of Mexico's five-member governing board may reiterate their worries about persistently high core inflation.

Next week's decision is set to take place following a new 90-day pause on U.S. tariffs on imports from Mexico, to allow time to negotiate a broader trade pact, even as U.S. President Donald Trump imposed steep duties on exports from dozens of other trading partners.

It would be the tenth easing move since the bank, known as Banxico, started a gradual drive to loosen its monetary policy in March last year.

The expected cut at Banxico's August 7 meeting would bring the rate to 7.75% from 8.00%, according to 27 of 28 analysts polled on July 28-31. One saw it unchanged.

The last time it stood at 7.75% was in June 2022.

"The dovish majority will likely draw comfort from the decline in headline inflation, while deputy governor (Jonathan) Heath might keep expressing concerns over core’s sticky dynamics," Deutsche Bank said in a report.

Mexico's headline inflation slowed in the first half of July but the measure that strips out volatile food and energy prices remained elevated.

Heath cast the sole vote to hold at the June meeting when Banxico last cut rates.

"The economy will likely continue to display prolonged slack conditions that support the ongoing monetary easing cycle," Deutsche economists wrote in a separate report.

Mexico's gross domestic product (GDP) expanded more than expected last quarter from the previous three-month period. However, year-on-year growth undershot forecasts.

The mixed outlook for inflation and economic trends would justify smaller rate cuts of 25 basis points from 50 in June, minutes of the bank's last meeting indicated.

A majority of 12 of 18 economists who answered an extra question on the timing of Banxico's next move said it would be September. The other six said different months.

All 19 contributors responding to another question said whenever the next move takes place, it will be a 25 basis point cut to 7.50%.

The easing cycle should then be extended in 2026 in line with views of continued weak economic growth next year, reflected in a separate Reuters poll.

The consensus for Mexico's policy outlook follows a strong appreciation of the peso currency MXN= since April.

(Other stories from the Reuters global economic poll)