Mexico’s central bank, known as Banxico, has upgraded its economic growth forecast for the year, citing stronger-than-expected performance despite ongoing external challenges. In its latest quarterly report released on August 29, the institution raised its 2025 GDP growth projection to 0.6%, up from a prior estimate of 0.1%. The outlook for 2026 was also revised upward, now standing at 1.1% compared to 0.9% previously. n nGovernor Victoria Rodriguez noted during the report’s presentation that the national economy has demonstrated resilience, outperforming what might be expected given uncertainties in the global landscape, particularly fluctuating trade policies from the United States, Mexico’s primary trading partner. n nHowever, Banxico cautioned that economic expansion remains limited. The report described current conditions as hovering between stagnation and sluggish activity. While growth has exceeded initial expectations, the pace is still insufficient to significantly reduce unemployment or boost household incomes. n nInflation remains a key concern. The bank now anticipates headline inflation will reach 3.7% in the fourth quarter of 2025, an increase from the earlier forecast of 3.3%. Core inflation, which excludes volatile items such as food and energy and is viewed as a more stable measure, is projected to hit 3.7% in late 2025—up from 3.4% in the previous estimate. n nDespite elevated price pressures, Banxico recently reduced its benchmark interest rate to 7.75%, the lowest level in three years. The decision was driven by weak economic momentum, with policymakers aiming to stimulate investment and consumption. Rate cuts are typically used to encourage borrowing and spending, though they carry the risk of further inflating prices. n nDeputy Governor Jonathan Heath was the sole dissenter in the rate decision, opposing the cut due to lingering inflationary trends. During the report’s presentation, he pointed to rising prices in everyday goods, particularly in food services such as taco stands and restaurants, as evidence that inflation remains embedded in certain sectors. n nThe central bank maintains its expectation that headline inflation will return to its 3% target by the third quarter of 2026. Still, the revised forecasts underscore the delicate balance between supporting economic activity and controlling price increases. n nThe full impact of U.S. trade policies, including potential tariffs, remains uncertain and may take time to fully affect Mexican industries. Banxico emphasized that while the economy has so far weathered external shocks, continued vigilance is necessary to navigate evolving conditions. n— news from Reutersn
— News Original —nMexico’s central bank hikes economic forecast but growth remains sluggishn nMEXICO CITY, Aug 29 (Reuters) – Mexico ‘s economy is performing better than expected, the Bank of Mexico said on Friday in its quarterly report, while increasing its growth forecast for the rest of the year for Latin America ‘s second largest economy. n nThe report offered a positive, if mixed, assessment: Mexico ‘s economy is showing resilience in the face of an uncertain business environment and on-again, off-again tariffs from the U.S., Mexico ‘s largest trade partner. n nSign up here. n nBut Banxico, as Mexico ‘s central bank is known, said economic growth remains sluggish and it projected higher rates of inflation for the rest of the year compared with its previous estimate. n nIt said the economic effects of U.S. tariffs may take more time to become clear. n n”The Mexican economy has performed better than the external environment would suggest and could continue performing better than anticipated as long as the adverse effects of change in U.S. economy policy take time to materialize,” the bank ‘s quarterly report said. n nBanxico raised its forecast for economic growth this year to 0.6% from its previous estimate of 0.1%. The central bank also increased its outlook for economic growth in 2026 to 1.1% from a prior estimate of 0.9%. n n”The Mexican economy grew more than expected,” Central Bank Governor Victoria Rodriguez said during a presentation of the report. n nBut the bank also highlighted an increase in the price of goods. It now expects annual headline inflation in the fourth quarter to reach 3.7%, versus a prior forecast of 3.3%. Even so, the bank maintained its estimate that headline inflation will converge to its 3% target in the third quarter of 2026. n nThe forecast for annual core inflation, which excludes some volatile goods and is considered a more reliable indicator, was revised upwards to 3.7% for the fourth quarter of 2025, compared with the bank ‘s earlier forecast of 3.4%. n nBanxico cited the economy ‘s weakness as a factor when it cut its benchmark interest rate earlier this month to 7.75%, bringing the rate to its lowest level in three years. n nCentral banks often cut interest rates to stimulate the economy, although that can also fuel inflation. n nDeputy Governor Jonathan Heath, who was the only member of the five-member board to vote against lowering the interest rate and cited persistent inflation, again raised concerns during Friday ‘s presentation, singling out higher food prices at taco stands and restaurants. n nBut he said Mexico ‘s economy clearly needs to grow more, saying it ‘s between “lethargy and stagnation.” n nReporting by Sarah Morland, Emily Green, Ana Isabel Martinez and Adriana Barrera; Editing by Daina Beth Solomon and Edmund Klamann