Overview
- Moody’s Analytics argues Banxico’s current policy is not believed to achieve the 3% inflation target, saying markets and analysts doubt its effectiveness.
- The report cites three pillars for the loss of credibility: a premature withdrawal of monetary restraint in 2025, deteriorating inflation expectations, and a persistent rise in core inflation.
- Core inflation climbed from 3.7% at end-2024 to 4.3% at end-2025 and stayed above 4% in the second half of 2025 as easing accelerated.
- Banxico cut its policy rate by about 300 basis points in 2025 versus 125 basis points in 2024, and the stance shifted to neutral by September, according to the coverage.
- Moody’s recommends halting cuts or raising rates to re-anchor expectations; Banxico’s board rejects talk of a credibility crisis as subgovernor Jonathan Heath’s dissents and outside economists’ doubts highlight internal and market skepticism.