Bank of Mexico cuts growth forecast as inflation optimism is questioned

Economic Growth Forecast - The Bank of Mexico has cut its growth forecast for the economy to 0.3% for this year, down from a previous estimate of 0.6% [1][2] - The central bank maintained its growth forecast at 1.1% for 2026 and projected 2.0% for 2027 [1] Inflation Projections - The Bank of Mexico raised its short-term inflation forecasts, with annual headline inflation recorded at 3.61% in early November and core inflation at 4.32% [4][5] - The bank expects inflation to reach its 3% target by the second half of next year, but has slightly increased its forecasts for average annual core inflation for late 2025 and early 2026 [5] Monetary Policy and Rate Cuts - The central bank has cut its benchmark interest rate by four percentage points since early last year, with the latest cut bringing the rate to 7.25%, the lowest since May 2022 [3] - The majority of board members justified the rate cuts by citing falling headline inflation and ongoing economic weakness [4] Internal Debate and Credibility Concerns - There is an internal debate within the Bank of Mexico regarding the effectiveness of its monetary easing, highlighted by Deputy Governor Jonathan Heath's concerns about the credibility of the bank's inflation forecasts [3][6] - Heath has expressed skepticism about achieving the 3% inflation target by the third quarter of 2026, given the elevated short-term forecasts [6] Analyst Expectations - Analysts polled by Citi project higher inflation rates for the end of 2026, with headline inflation at 3.91% and core inflation at 3.83% [7]