By Aida Pelaez-Fernandez
MEXICO, Oct 30 (Reuters) - Mexico's economy grew more than expected in the third quarter, preliminary data showed on Friday, suggesting growth in Latin America's second-largest economy is cooling gradually and reducing pressure on the central bank to cut interest rates at next week's meeting.
Gross domestic product expanded 0.9% in the July-to-September period from the previous quarter, above the 0.7% forecast in a Reuters poll of analysts, though slower than the 1.4% growth
recorded in the second quarter.
The figures are likely to reassure policymakers and investors that domestic demand is holding up even as growth cools.
The central bank, known as Banxico, is due to announce its latest policy decision next week. Analysts said the stronger-than-expected reading weakens the case for an immediate rate cut, even if the economy is losing some momentum.
Finance Minister Edgar Amador said later on Friday that growth in 2026 could reach the upper end of the government's forecast range if current momentum is sustained. He maintained the ministry's forecast for full-year growth of between 1% and 2%.
"Mexico's economy maintained solid momentum in Q3, confirming that the recovery extends beyond the temporary boost from the FIFA World Cup," said Andres Abadia, Pantheon Macroeconomics' chief Latin America economist.
Abadia said the data reinforced expectations that Banxico would keep its benchmark interest rate at 6.50% through the first half of 2027.
Growth in the quarter was driven by a 1.1% expansion in the services sector and a 0.8% rise in industry, including manufacturing and construction. Primary activities such as agriculture and mining contracted 0.4%.
On an annual basis, the economy grew 3.2%, well above economists' expectation of 2.5%.
"The tone of Banxico's communications at next week's meeting will be much less dovish than in September," analysts at Capital Economics said.
(Reporting by Aida Pelaez-Fernandez, Ricardo Figueroa and Ana Isabel Martinez; Writing by Natalia Siniawski, Editing by Anthony Esposito and Sanjeev Miglani)
