Bank of Mexico Holds Policy Rate at 6.50%

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.