Puerto Vallarta, Mexico – The Mexican peso weakened on Monday following the release of an inflation report that reinforced market expectations of additional significant cuts to the country’s key interest rate.
By midday in international trading, the peso was quoted at 20.4514 pesos per dollar, marking a 0.20% decline from the LSEG reference price on Friday and extending its losing streak to a second consecutive session.
The fresh data from the first half of February showed Mexico’s general consumer price index rebounding to 3.74%. While this remains comfortably within the central bank’s target range of 3% ±1 percentage point, analysts note the increase could color expectations around the pace and extent of future rate decisions. Core inflation, which strips out volatile items such as food and energy, stood at 3.61%.
Earlier this month, Banco de México (Banxico) surprised markets by deepening its rate cuts, slashing the benchmark funding rate by 50 basis points to ease monetary conditions further. This move followed five consecutive cuts of 25 basis points each since the rate’s historic peak of 11.25% last year. Officials suggested that similar half-point adjustments could be on the table in coming meetings, should the economic outlook warrant.
The latest inflation figures come on the heels of a separate report released Friday confirming that Mexico’s economy contracted in the fourth quarter of 2024, capping the worst annual performance since the pandemic. Economists say the combination of subdued growth and moderate inflation may strengthen the case for further monetary easing, though the peso’s ongoing depreciation underscores investors’ caution over how quickly and aggressively Banxico can proceed with additional rate cuts.
Market participants will be closely watching upcoming data releases and any signals from policymakers, as Banxico balances the need to support a slowing economy with maintaining price stability.
