Mexico Interest Rate

The Bank of Mexico left its benchmark interest rate unchanged at 7.00% in its February 5, 2026 meeting, pausing the easing cycle and keeping the rate at its lowest level since May 2022. This pause ends the recent sequence of rate reductions that began in March last year. Mexico’s economic activity expanded in Q4 2025 after the contraction recorded in Q3, although the Board warned that downside risks from trade tensions and global uncertainty persist. The decision to hold was taken unanimously by the Board, which judged a pause appropriate given the current inflation outlook and the need to assess the impact of policy changes. Headline inflation eased slightly to 3.77% in mid-January from 3.80% in November, while core inflation rose to 4.47% (from 4.43%), remaining stubbornly above 4%. Despite these near-term pressures, Banxico now projects inflation will converge to its 3% target in the second quarter of 2027.

The Bank of Mexico cut its benchmark interest rate by 25bps to 7% in its December meeting, as expected, bringing it to its lowest level since May 2022. This marks the twelfth consecutive rate cut in an easing cycle that began in March last year, aimed at stimulating economic growth amid sluggish GDP performance and uncertainty over US tariffs. Mexico’s GDP shrank 0.2% in Q3 after stagnating in Q2, prompting Banxico to halve its 2025 growth forecast to 0.3%, though it expects 1.1% in 2026 and 2% in 2027. The decision was split, with Deputy Governor Jonathan Heath voting to hold, reflecting concerns over persistent inflation. Headline inflation rose to 3.8% in November, slightly above expectations, while core inflation, excluding volatile items, remains stubbornly above 4%. Despite near-term inflation risks, Banxico projects inflation will return to its 3% target by Q3 2026.

The Bank of Mexico cut its benchmark interest rate by 25 bps to 7.25% in its November meeting, in line with market expectations, bringing it to its lowest level since May 2022, and indicated it would consider further easing at future meetings. The decision came amid ongoing concerns about global trade tensions and weakening economic activity in the country. In a statement on Thursday, the bank said it took into account “the weakness of economic activity” and persistent global uncertainty in its decision to lower borrowing costs. Between the first half of September and the first half of October, annual core inflation eased slightly from 4.26% to 4.24%, while headline inflation decreased from 3.74% to 3.63%. In updated forecasts released on Thursday, Banxico maintained its estimate for year-end annual core inflation at 4.2% in the fourth quarter, while projecting headline inflation to converge to the 3% target by the third quarter of 2026.