Mexican Peso Weakens After Fed Rate Hike

2026-09-18 13:12 By Isabela Couto 1 min. read

The Mexican peso weakened to near 17.2 per US dollar after touching a more than two-year high of 16.98 on September 11th, following the US Fed’s decision to raise interest rates.

The Fed increased its federal funds target rate by 25 bps to 3.75%-4.00%, as widely expected, while a majority of FOMC members projected another hike this year.

The narrowing interest-rate differential is supporting the dollar.

Mexico’s central bank left its benchmark rate unchanged at 6.50% at its August meeting, noting that inflation is expected to continue declining gradually and converge to the 3% target in the fourth quarter of 2027.

Banxico also highlighted that Mexico’s economy rebounded in the second quarter after contracting in the previous quarter, although downside risks to growth persist.

The board reiterated that it expects to keep the benchmark rate at its current level amid uncertainty over geopolitical conflicts, global trade policies, and their potential impact on inflation.



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Mexican Peso Weakens After Fed Rate Hike
The Mexican peso weakened to near 17.2 per US dollar after touching a more than two-year high of 16.98 on September 11th, following the US Fed’s decision to raise interest rates. The Fed increased its federal funds target rate by 25 bps to 3.75%-4.00%, as widely expected, while a majority of FOMC members projected another hike this year. The narrowing interest-rate differential is supporting the dollar. Mexico’s central bank left its benchmark rate unchanged at 6.50% at its August meeting, noting that inflation is expected to continue declining gradually and converge to the 3% target in the fourth quarter of 2027. Banxico also highlighted that Mexico’s economy rebounded in the second quarter after contracting in the previous quarter, although downside risks to growth persist. The board reiterated that it expects to keep the benchmark rate at its current level amid uncertainty over geopolitical conflicts, global trade policies, and their potential impact on inflation.
2026-09-18
Mexican Peso Holds Near 2-Year High
The Mexican peso strengthened to near 16.98 per US dollar, remaining close to the more than two-year high of 16.91 touched on September 4th, as Mexico’s industrial production rose 2.7% yearly in July 2026, the highest level since April 2024 and above expectations of a 1.8% gain. Gross fixed investment also rose 7.7% in June, beating expectations for a 4.8% increase. In its latest decision to keep the key interest rate unchanged at 6.50%, Banxico highlighted that the economy rebounded in 2Q26. This could support a more hawkish stance and attract higher foreign capital inflows through exports. Meanwhile, the dollar found support on expectations that the Federal Reserve could raise interest rates in September. Core US CPI increased slightly more than expected from the previous month, while headline inflation remained elevated amid higher energy costs. A Fed rate hike would narrow the US-Mexico interest-rate differential.
2026-09-11
Mexican Peso Hits Highest Level Since 2024
The Mexican peso strengthened to around 16.91 per US dollar in September, reaching its highest level since May 2024. US nonfarm payrolls increased by 162,000 last month, well above market expectations for a 56,000 gain. The figures point to continued strength in the US labor market, which is positive for Mexican exports and the economy given the close trade relationship between the two countries. The trade war between the US and Canada, along with trade tensions involving other countries, has positioned Mexico relatively favorably in trade terms, despite the country also being affected by tariffs. Also, Mexico’s gross fixed investment rose 7.7% year-on-year in June, beating expectations for a 4.8% expansion. However, while the strong US jobs data supports economic stability, it boosted expectations for a September Fed rate hike, which would support the dollar and narrow the US-Mexico interest-rate differential.
2026-09-04