Mexican Peso Weakens as Fed Rate Hike Bets Grow

2026-05-15 18:24 By Isabela Couto 1 min. read

The Mexican peso weakened to 17.3 per USD in mid-May as rising energy-driven inflation pressures fueled expectations that the Federal Reserve could raise interest rates later this year.

The stronger US dollar coincided with higher US Treasury yields, adding pressure on emerging market currencies.

Earlier in the month, the Bank of Mexico lowered its benchmark interest rate by 25 basis points to 6.5%, but signaled that the easing cycle that began in March 2024 had likely ended.

Banxico adopted a more cautious stance as elevated energy prices linked to the Middle East conflict threatened to lift inflation expectations in Mexico.

Meanwhile, the latest GDP data showed the Mexican economy contracted 0.8% in the first quarter, a steeper decline than markets had expected.



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Mexican Peso Weakens as Fed Rate Hike Bets Grow
The Mexican peso weakened to 17.3 per USD in mid-May as rising energy-driven inflation pressures fueled expectations that the Federal Reserve could raise interest rates later this year. The stronger US dollar coincided with higher US Treasury yields, adding pressure on emerging market currencies. Earlier in the month, the Bank of Mexico lowered its benchmark interest rate by 25 basis points to 6.5%, but signaled that the easing cycle that began in March 2024 had likely ended. Banxico adopted a more cautious stance as elevated energy prices linked to the Middle East conflict threatened to lift inflation expectations in Mexico. Meanwhile, the latest GDP data showed the Mexican economy contracted 0.8% in the first quarter, a steeper decline than markets had expected.
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