Banxico Unanimously Maintains Rate at 11.25% for 7th Consecutive Meeting

The Bank of Mexico reduced its benchmark interest rate by 25 basis points to 6.75% in its March 26, 2026 meeting, unexpectedly resuming the easing cycle. This reduction follows the brief pause in rate cuts that occurred in February after the sequence of easing began in March last year. Mexico’s economic activity showed marked weakness in early 2026 after expanding in the previous quarter, and the Board warned that downside risks from trade tensions and global uncertainty continue to imply risks to the outlook. The decision to cut was taken by a majority of the Board, which judged a reduction appropriate given the current inflation panorama, the weakness in economic activity, and the degree of monetary restriction implemented. Headline inflation rose to 4.63% in mid-March from 3.77% in January, while core inflation remained practically unchanged at 4.46%, remaining above 4%. Despite these near-term pressures, Banxico still projects inflation will converge to its 3% target in Q2 2027.

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.