- Decision
- Lower
- Rate change
- 25 bps
- overnight interbank interest rate
- 6.5%
Banco de México cut its overnight interbank rate by 25 bp to 6.50% effective 8 May 2026, citing weaker-than-expected first-quarter GDP, wider economic slack and a continued, though moderating, disinflation process that still faces upward risks. This move extends the easing cycle that has lowered the policy rate by a cumulative 300 bp since February 2025. The corridor or operating framework was unchanged. Headline CPI eased to 4.45 % in April from 4.63 % in mid-March, driven by a decline in core inflation to 4.26 %, yet year-end 2026 inflation expectations inched higher and the balance of risks remains tilted upward; headline inflation is still projected to return to the 3 % target in Q2 2027. Domestic government bond yields fell at the short and medium end but rose at longer tenors, while the peso strengthened. Internationally, global growth picked up in Q1, energy-led rises kept headline inflation elevated in key advanced economies, and the US dollar weakened amid volatile markets and lingering but reduced uncertainty around the Middle Eastern conflict. The Governing Board signalled that, after closing the easing cycle, it now expects to keep the policy rate unchanged for some time, judging the current stance adequate to address prevailing macroeconomic challenges.
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%.