The Board of Governors of the Bank of Mexico unanimously decided to keep the target interest rate at 7 percent, pausing the cycle of cuts started in 2024. This decision responds to a complex inflationary landscape, with upward revised forecasts for 2026. The Mexican peso closed at 17.3 pesos per dollar, reflecting market caution.
The Board of Governors of the Bank of Mexico (Banxico) unanimously chose not to change the target interest rate, keeping it at 7 percent. This pause follows 12 consecutive cuts that began in mid-2024, temporarily ending a cycle of decreases. Analysts like Diego Albuja from ATFX Latam attribute the slight depreciation of the Mexican peso, which closed at 17.3 pesos per dollar with a 0.33 percent gain, to caution ahead of this decision.
Banxico's statement emphasizes that the measure aligns with the assessment of the current inflationary outlook. January's inflation stood at 3.77 percent, higher than December but below expectations, driven by increases in cigarettes, sodas, snacks, and items like taquerias. Factors such as IEPS hikes, tariffs on Asian products, and wage pressures contribute to a high-inflation environment, projected at 4 percent for the first quarter of 2026.
Forecasts were revised upward: 4 percent in the first quarter, 3.8 percent in the second, 3.6 percent in the third, and 3.5 percent at the end of 2026. Previously, estimates were 3.7 percent in the first quarter and 3 percent in the second half. The 3 percent target is now delayed to the second quarter of 2027. Banxico will consider future adjustments based on these elements, including the limited impact of tariffs and IEPS.
Victoria Rodríguez, Banxico's governor, stated that further cuts in 2026 are not ruled out if inflation shows stable marginal readings without second-order effects. This decision reflects the need to evaluate the exchange rate, economic weakness, and prior monetary restriction.
