Mexican central bank seen cutting key rate to 4.25pc

Mexico's central bank is seen slowing the pace of cuts to its benchmark interest rate at a monetary policy announcement this week, a Reuters poll showed on Monday, possibly signaling that a pause to the loosening cycle is on the horizon.

In the survey, 21 out of 27 analysts consulted predicted the monetary authority would lower the interbank interest rate by 25 basis points to 4.25%, in what would be the eleventh consecutive cut since August 2019.

At the past five meetings Banco de Mexico has lowered rates by 50 basis points cuts, but a rebound in inflation is widely expected to impact the upcoming decision.

One participant forecast a 50 basis point reduction and five more said the rate would remain stable, the survey showed.

By the end of 2020, the rate is seen at 4.00%, according to the median of the projections, suggesting Banxico will cut another 25 basis points in one of the two monetary policy announcements scheduled for November and December.

According to the median projection, rates will remain at 4% in 2021.

Mexico's year-on-year inflation accelerated in August above the central bank's target and to its highest level in 15 months.

Banxico estimated at the end of last month that the Mexican economy could fall by as much as 12.8% in 2020, affected by restrictions in place to limit the coronavirus pandemic.

The bank will publish its monetary policy statement on Thursday at 1:00 p.m. (1800 GMT).