- Decision
- Maintain
- Rate change
- 0 bps
- overnight interbank interest rate
- 7%
The Bank of Mexico’s Governing Board unanimously held the target for the overnight interbank interest rate at 7.00%, pausing its rate-cutting cycle as it assessed a less favorable inflation outlook, upward revisions to inflation forecasts, the effects of fiscal adjustments introduced at the beginning of the year, exchange-rate developments, weak economic activity and the degree of monetary restriction already in place. In implementation terms, the central bank maintained the overnight interbank rate target at 7.00%. Between November 2025 and the first fortnight of January 2026, headline inflation eased to 3.77% from 3.80%, but core inflation rose to 4.47%, prompting upward revisions to headline and core inflation projections from the first quarter of 2026 through the first quarter of 2027, with headline inflation now seen converging to the 3% target in the second quarter of 2027; headline inflation expectations for end-2026 also increased while longer-term expectations remained above target. Domestically, economic activity expanded in the fourth quarter of 2025 after contracting in the third quarter, although uncertainty and trade tensions continued to pose downside risks. Since the previous policy decision, Mexico’s government interest rates declined across maturities and the Mexican peso appreciated. Globally, the Board said world growth likely slowed further in the fourth quarter of 2025 amid persistent trade tensions, while escalating trade tensions and intensified geopolitical turmoil remained key risks for inflation, activity and market volatility. Looking ahead, the Board said it will evaluate additional reference-rate adjustments and calibrate policy to ensure an orderly and sustained convergence of headline inflation to target over the forecast period.
Rate evolution
The Bank of Mexico lowered the policy rate by 100 basis points from 8.00% in June 2025 to 7.00% in December 2025, moving from a 50 basis point cut to a run of 25 basis point reductions, before pausing in February 2026, resuming easing with a 25 basis point cut to 6.75% on March 26, effective March 27, and maintaining the target for the overnight interbank interest rate at 6.50% on June 25, August 6 and September 24. The Governing Board eased as economic activity weakened and trade tensions posed downside risks, while mixed inflation dynamics and persistent core inflation led it to revise forecasts and, in August, delay expected convergence to target to the fourth quarter of 2027, a timeframe it retained in September.
On February 5, the Board left the target at 7.00%, judging it appropriate to pause the rate-cutting cycle while assessing the revised inflation outlook, fiscal adjustments introduced at the beginning of the year, exchange rate developments, weak activity and the degree of monetary restriction, before resuming rate cuts on March 26 after considering observed exchange rate levels, weak activity and the degree of monetary restriction, even as headline inflation rose to 4.63% in the first fortnight of March from 3.77% in the first fortnight of January, core inflation remained at 4.46%, and risks to the inflation path stayed biased to the upside. On June 25, the Board unanimously maintained the target at 6.50% after assessing exchange rate levels, the absence of demand-related pressures and the degree of monetary restriction, while headline and core inflation had declined to 3.55% and 4.12%, respectively, in the first fortnight of June and the economy was expected to expand in the second quarter after contracting in the first. On August 6, it unanimously held the target at 6.50% and signalled that maintaining the rate at its current level would be appropriate, noting that the economy had rebounded in the second quarter and slack was expected to persist, while headline and core inflation fell to 3.10% and 3.95%, respectively, in the first fortnight of July. On September 24, the Board again unanimously held the target at 6.50% after assessing exchange rate behavior, the different stages of the economic cycles in Mexico and the United States, the absence of demand pressures in Mexico and the degree of monetary restriction, as third-quarter activity appeared to moderate and slack was expected to persist, while headline inflation rose to 3.42% in the first fortnight of September due to higher non-core inflation and core inflation declined to 3.79%.