MEXICO CITY, May 16, 2025 (BSS/AFP) - Mexico's central bank on Thursday announced a third straight half-percentage-point cut to its benchmark interest rate due to a weakening economy and US President Donald Trump's trade war.

The governing board's decision to lower the key rate to 8.5 percent was unanimous, the Bank of Mexico said in a statement.

"In view of the foreign trade tensions, prospects for world economic growth, particularly those for the US economy, have been revised downwards," it said in a statement.

The bank signaled further rate cuts of "similar magnitudes" were likely.

"It anticipates that the inflationary environment will allow to continue the rate cutting cycle, albeit maintaining a restrictive stance," the statement said.

Mexico's economy, the second-largest in Latin America, is considered one of those most vulnerable to Trump's tariffs due to the close trade relations between the two countries.

It narrowly avoided a recession in the first quarter of 2025, with gross domestic product expanding by 0.2 percent from the previous quarter, when it had contracted for the first time in three years, a preliminary official estimate showed last month.

Trump has announced various tariffs targeting Mexico, as well as several policy U-turns, as part of his global trade war.

While he left Mexico off the list of nations facing his steep "reciprocal tariffs," its carmakers as well as steel and aluminum exporters still face duties.