Banxico Holds Key Rate at 6.50% in September

Mexico’s central bank left its benchmark interest rate unchanged at 6.50% at its September meeting, in line with market expectations. The governing board said it assessed the inflation outlook considering exchange-rate developments, differences in the economic cycles of Mexico and the US, the absence of demand pressures in Mexico, and the degree of monetary restriction in place. The headline inflation forecast for the third quarter of 2026 was revised downward due to lower-than-expected non-core inflation, while the core inflation forecast was revised slightly upward. The balance of risks around the inflation outlook remains tilted to the upside. Changes in US economic policy and prolonged geopolitical conflicts continue to add uncertainty. Meanwhile, the Mexican economy is estimated to have moderated in the third quarter, with slack conditions expected throughout the forecast horizon and downside risks to economic activity persisting.

Mexico's central bank left its benchmark interest rate unchanged at 6.50% at its August meeting, in line with market expectations. Policymakers said the decision reflects an appropriate degree of monetary restraint as inflation continues to ease while risks remain tilted to the upside. Annual inflation slowed to 3.10% in the first half of July from 3.55% in mid-June, while core inflation eased to 3.95%. The central bank noted that inflation is expected to continue declining gradually, with headline inflation projected to 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, citing uncertainty related to geopolitical conflicts, global trade policies, and their potential impact on inflation.

Banxico kept its benchmark interest rate unchanged at 6.50% during its June 2026 meeting, in line with expectations. It was noted that the economy is expected to rebound in the second quarter, although significant downside risks to activity remain. Inflation continued to ease between April and mid-June, with headline inflation down from 4.45% to 3.55%, while core inflation eased from 4.26% to 4.12%. Banxico revised down its headline inflation forecasts for the second quarter due to softer non-core prices, while slightly raising its core inflation outlook through the end of 2026. Banxico maintained its projection for headline inflation to converge to the 3% target in the second quarter of 2027. Policymakers said the balance of risks remains tilted to the upside, citing trade disruptions, geopolitical tensions, persistent core inflation, climate-related shocks, and possible peso depreciation. Banxico signaled that it will likely be keeping the policy rate at its current level.