Banxico keeps interest rates unchanged at 6.50% as expected

Christian Borjon Valencia FXStreet

The Bank of Mexico (Banxico) held rates unchanged at 6.50% for the third consecutive meeting on Thursday in a unanimous decision, as expected by most analysts, after ending its easing cycle in May.

In the monetary policy statement, the Governing Board said the balance of risks on inflation is tilted to the upside, and that "looking ahead, the Governing Board estimates that it will be appropriate to maintain the reference rate at its current level."

The Mexican institution expects inflation to converge to its 3% target, plus or minus 1%, in the last quarter of 2027. For 2026, Banxico’s projection for headline and core inflation is 3.5%. Regarding economic activity, the central bank stated that “economic slack is expected to continue throughout the forecast horizon and significant downward risks to economic activity persist.”

Key highlights:

BOARD UNANIMOUSLY VOTE TO HOLD INTEREST RATE AT 6.50%

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 3.5% VERSUS PREVIOUS FORECAST OF 3.5%

BANXICO FORECASTS Q4 2027 CORE INFLATION AT 3.0% VERSUS PREVIOUS FORECAST OF 3.0%

BANXICO: HEADLINE INFLATION IS PROJECTED TO CONVERGE TO TARGET IN Q4 OF 2027

BANXICO: BALANCE OF RISKS FOR THE TRAJECTORY OF INFLATION WITHIN THE FORECAST HORIZON REMAINS BIASED TO THE UPSIDE

BANXICO: LOOKING AHEAD, THE BOARD ESTIMATES IT WILL BE APPROPRIATE TO MAINTAIN THE RATE AT ITS CURRENT LEVEL

BANXICO: INFLATION OUTLOOK, BOTH HEADLINE AND CORE INFLATION ARE STILL EXPECTED TO DECLINE THROUGHOUT THE FORECAST HORIZON, ALBEIT MORE GRADUALLY THAN
PREVIOUSLY ANTICIPATED

BANXICO: MEXICO ECONOMIC SLACK IS EXPECTED TO CONTINUE THROUGHOUT THE FORECAST HORIZON AND SIGNIFICANT DOWNWARD RISKS TO ECONOMIC ACTIVITY PERSIST

Banxico’s forecast for inflation

Banxico FAQs

What is the Bank of Mexico?

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%.

How does the Bank of Mexico’s monetary policy influence the Mexican Peso?

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.

How often does the Bank of Mexico meet during the year?

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.

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.

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