Banxico unanimously holds benchmark rate at 6.50%
On Thursday, the Bank of Mexico (Banxico) held interest rates unchanged at 6.50% for the third time, as expected, in a unanimous decision.
The monetary policy statement noted that headline inflation forecasts were revised downward for Q3 2026 due to lower anticipated non-core inflation. However, core inflation projections were modestly revised upward, and Banxico expects inflation to converge toward its 3% target in Q4 2027.
Worth noting that the Mexican central bank said prolonged geopolitical conflicts add uncertainty to forecasts. Additionally, Banxico said that monetary policy “would not have to react mechanically to the anticipated adjustments to the Fed funds rate.”
Key highlights:
Mexico central bank leaves benchmark interest rate unchanged at 6.50%
Says board was unanimous on rate decision
Headline inflation forecasts were revised downwards for the third quarter of 2026 due to lower levels of non-core inflation anticipated for that period
Says core inflation forecasts were adjusted slightly upwards between the third and fourth quarter of 2026
Headline inflation is still expected to converge to the target in the fourth quarter of 2027
Looking ahead, governing board will make its decisions considering the ongoing disinflation process and expected behavior of its determinants, including exchange rate pass-through to consumer prices, the Slack conditions, inflation expectations
Says economic slack is expected to continue throughout the forecast horizon and downward risks to economic activity persist
Says the balance of risks for the trajectory of inflation within the forecast horizon remains biased to the upside
Says the changes in economic policy by the US administration and a possible extension of geopolitical conflicts continue adding uncertainty to the forecasts
Banxico: their effects could imply pressures on inflation on both sides of the balance
Banxico forecasts Q4 2026 headline inflation at 3.5% versus previous forecast of 3.5%
Banxico forecasts Q4 2027 headline inflation at 3.0% versus previous forecast of 3.0%
Banxico forecasts Q4 2026 core inflation at 3.6% versus previous forecast of 3.5%
Banxico forecasts Q4 2027 core inflation at 3.0% versus previous forecast of 3.0%
Since macroeconomic conditions in Mexico are different from those in the United States, monetary policy would not have to react mechanically to the anticipated adjustments to the Federal funds rate
Banxico FAQs
The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.
The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.
(This story was corrected on September 24 at 19:28 GMT to say that Banxico held interest rates unchanged for the third time, instead of the fourth time.)
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
