Mexico's central bank held its benchmark rate at 6.50% on Thursday, extending the pause it began in June. Banxico also pushed back its forecast for headline inflation to reach target, now expecting a return to 3% only in the fourth quarter of 2027 instead of the second.
Banco de México's five-member board voted unanimously on Thursday to hold its benchmark interest rate at 6.50%, extending the pause it set in June and matching what markets had priced in. The bank said it would likely keep the setting unchanged for now.
Inflation target pushed to 2027
Banxico left its end-2026 forecasts for headline and core inflation unchanged at 3.5%, but it now expects headline inflation to converge to its 3% target only in the fourth quarter of 2027, later than the second quarter of 2027 it had projected previously. Officials said both headline and core inflation should keep declining through the forecast horizon, though more gradually than previously anticipated.
Thursday's statement carried a slightly more hawkish tone than June's, though analysts said it still pointed to no rate move coming soon. Goldman Sachs said the bank appeared likely to hold borrowing costs steady for the rest of 2026.
Peso and trade risks cloud the outlook
Banxico pointed to stubborn underlying price pressures, possible trade disruptions, global conflicts, climate-related shocks, rising business costs and the chance of a weaker peso as risks that could push inflation higher. It also said changes in U.S. policy and worsening international tensions were making the outlook harder to predict.
Economy rebounds after Q1 contraction
The decision follows a rebound in Mexico's economy: preliminary data from statistics agency INEGI showed gross domestic product grew 1.5% in the second quarter from the previous quarter, after a 0.6% contraction in the first quarter. Even so, Banxico said the economy is likely to remain weak, with spare capacity lingering and clear risks that growth could disappoint.
Source: Reuters
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