Mexico's central bank has cut the country's growth outlook for 2025 by half, citing potential US tariffs. The central bank reduced its forecast for GDP growth to 0.6% for the year, down from a prior estimate of 1.2%, compared to 1.5% growth in 2024.
The revision is attributed to "high uncertainty" over potential US tariffs and other measures taken by the new US administration. The threat of tariffs alone is expected to impact investment and consumption in Mexico this year, with uncertainty potentially extending into upcoming discussions over the USMCA free trade agreement.
The central bank provided a range of -0.2% to 1.4% for 2025 growth, while 2026 growth is projected to fall within a range of 1% to 2.6%. The updated inflation outlook estimates Mexico's year-end annual consumer price index (CPI) at 4.5%, slower than the previous estimate of 4.7%. The bank projects that CPI will reach its goal of 3% in the fourth quarter of 2026, a year later than previously estimated.
CPI eased to an annual 3.59% in January, the lowest in four years, as deceleration in agriculture prices offset faster inflation in energy, consumer goods, and services.
On February 6, the central bank accelerated its current rate easing cycle, cutting its target rate by a half point to 9.5%. The board is considering similar cuts in the coming months, with the next meeting set for March 27.
Board governors addressed the potential inflationary impact of major US tariffs on Mexico, arguing that the flexibility of the Mexican peso-US dollar exchange rate should help absorb some tariff impacts. Deputy governor Gabriel Cuadra stated that the Mexican economy has proven resilient to complex challenges and that the bank is ready to confront any eventuality with the trade dispute, citing solid foreign reserves and multiple tools for confronting inflationary spikes.
