- Decision
- Maintain
- Rate change
- 0 bps
- overnight interbank interest rate
- 6.5%
The Bank of Mexico’s Governing Board unanimously held the target for the overnight interbank interest rate at 6.50% on June 25, 2026, judging that the observed exchange rate, the absence of demand-related pressures and the existing degree of monetary restriction were consistent with keeping policy unchanged even as inflation forecasts remained subject to upside risks and economic slack was expected to persist. The central bank said the Mexican economy was anticipated to expand in the second quarter of 2026 after contracting in the previous one, but significant downside risks to activity remained throughout the forecast horizon. Headline inflation fell from 4.45% in April to 3.55% in the first fortnight of June, while core inflation eased from 4.26% to 4.12%; headline inflation forecasts for the second quarter were revised down, core forecasts for the second to fourth quarters were adjusted slightly up, and headline inflation was still expected to converge to target in the second quarter of 2027. Since the previous policy decision, Mexican government bond yields declined across most maturities and the peso depreciated. Globally, the central bank said activity in the second quarter was expected to match the previous quarter’s pace, inflation in some major advanced economies rose on higher energy prices, markets were volatile, most commodity prices fell, the USD appreciated, and uncertainty linked to the Middle East conflict persisted despite negotiations suggesting a solution was underway. Looking ahead, the Governing Board estimated that maintaining the reference rate at its current level would 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%.