07:50 AM EDT, 05/14/2025 (MT Newswires) -- Mexico's central bank (Banxico) set to deliver another 50bps cut to 8.50% on Thursday despite signs of slower disinflation, said BBVA Research.

In contrast to the United States Federal Reserve, which held rates unchanged last week, Banxico has room to continue cutting rates, noted BBVA Research. A low exchange rate pass-through and deeper domestic capital markets grant Banxico greater policy independence from the Fed than in the past.

The Mexican economy avoided a technical recession in Q1 2025, but underlying economic weakness continues to justify further monetary easing, stated BBVA Research.

Following April's inflation data and three straight 50bps rate cuts, the Board may adopt a less dovish tone in its forward guidance on the pace of future rate moves, it pointed out.

With no inflation risks stemming from exchange rate developments, Banxico has room to further unwind its still excessively restrictive policy stance, BBVA Research added.

However, forward guidance may become slightly less dovish, reflecting both stronger-than-expected inflation and the likely upward revisions to Banxico's inflation forecasts.