Banxico leaves interest rates unchanged at 6.50% as expected
The Bank of Mexico (Banxico) held its main reference rate unchanged at 6.50% in a unanimous decision on Thursday, as expected. Based on its economic projections, Banxico noted that the balance of inflation risks is tilted to the upside.
Board signals restrictive stance as core inflation remains key focus
In the statement, the central bank mentioned that it is “appropriate to maintain the reference rate at its current level,” with the board focused on clear evidence that core inflation is easing and that external or domestic shocks are not feeding into inflation.
The statement added that the board “judges that the monetary policy stance is well-suited to face the challenges posed by the macroeconomic environment, including those associated with the international context. The central bank reaffirms its commitment to its primary mandate and the need to continue its efforts to consolidate an environment of low and stable inflation.”
Regarding economic projections, Banxico’s board expects the Mexican economy to expand in the second quarter of 2026, after contracting in Q1, while noting that “significant downside risks to activity remain.” About inflation, the central bank noted that “Headline inflation is still expected to converge to the target in the second quarter of 2027.”
Banxico’s economic projections
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.
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.
