Mexico’s Milder GDP Decline and Slowing Inflation Keep Further Rate Cuts on the Table

Mexico’s economy contracted less than expected in the first quarter, while inflation slowed in early May, keeping open the possibility of another interest-rate cut later this year even after the central bank said it had finished a two-year easing cycle.

According to Bloomberg Economics, gross domestic product fell in the quarter, but the decline was milder than economists had projected. At the same time, annual inflation in the first half of May eased in line with expectations, suggesting price pressures are still cooling. Together, the data point to an economy that is weakening but not collapsing, with inflation easing enough to leave room for policymakers to reconsider their recent pause.