- Decision
- Maintain
- Rate change
- 0 bps
- Policy rate after decision
- 6.5%
The Bank of Mexico’s Governing Board unanimously held the target for the overnight interbank interest rate at 6.50%, citing the inflation outlook, the absence of demand pressures and the degree of monetary restriction. Over the past year, the target fell from 7.75% in August 2025 to 6.50% after a final 25-basis-point cut in May 2026, before being held in June. Headline inflation declined to 3.10% in the first half of July and core inflation eased to 3.95%, although both are expected to fall more gradually than previously forecast and headline inflation is now seen converging to the 3% target in the fourth quarter of 2027, with risks still tilted to the upside. Economic activity rebounded in the second quarter after contracting in the first, but slack is expected throughout the forecast horizon and significant downside risks persist. The Mexican peso appreciated, while domestic long-term government yields increased. Globally, financial markets were volatile and commodity prices rose broadly amid a renewed escalation of the Middle East conflict, which continues to create uncertainty. The Governing Board signalled that maintaining the reference rate at its current level will be appropriate.
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%.