Central Bank of Mexico cuts policy rate by 25 basis points to 6.25% and signals prolonged hold

The Central Bank of Mexico reduced its overnight interbank interest rate target by 25 basis points to 6.25%, effective Nov. 6, 2026, in a 3-2 vote. The board characterized the move as a discrete adjustment and indicated that maintaining the new rate for a prolonged period would support inflation’s convergence to its 3% target. The two dissenting members preferred to keep the rate at 6.50%. The reduction reflected continued disinflation, economic slack and an absence of demand pressures. Existing monetary restraint remains in effect, while slack is expected to limit the impact of peso depreciation on consumer prices. Headline inflation nevertheless increased from 3.42% in the first half of September to 3.62% in the first half of October, driven by higher noncore inflation. Core inflation edged down from 3.79% to 3.78% over the same period. The headline inflation forecast for the fourth quarter of 2026 rose to 3.7% from 3.5%, while the core forecast increased to 3.7% from 3.6%. Both measures are still projected to reach 3% in the fourth quarter of 2027. Inflation risks remain tilted upward, including persistent core inflation, further peso depreciation and disruptions from trade policy or geopolitical conflicts.