By FocusEconomics
MEXICO CITY, Mexico – At the Bank of Mexico (Banxico) meeting on 25 June, the central bank decided to hold the target for the overnight interbank interest rate at 6.50 percent, after total cuts of 475 basis points since early 2024.
Bank in wait-and-see mode
The decision to hold was driven by a desire to assess the impact of past rate cuts, against a backdrop of soft economic activity and headline and core inflation which are currently close to the top of the 2.0–4.0 percent target range.
Rates to stay on hold: After substantial monetary easing over the last couple of years, our Consensus is for the central bank to not make any further interest rate cuts. This aligns with the bank’s own forward guidance.
On the outlook, Goldman Sachs’ Alberto Ramos, said:
“Given the central bank’s sharp focus on growth rather than inflation, we are of the view that despite the on-hold guidance the MPC could entertain additional rate cuts after the Summer if growth remains weak, the MXN is well-anchored, and the FOMC remains on hold. Conversely, were the FOMC to hike, the MPC would likely face unfavourable policy trade-offs given the very tight Mexico-US interest rate differential. At this juncture, we expect the MPC to keep the policy rate unchanged throughout the remainder of 2026.”
Itaú Unibanco analysts, said:
“The statement reflects a neutral stance with limited conviction for further near-term adjustments and a “higher-for-longer” bias unless inflation surprises materially. We continue to see the policy rate at 6.50 percent through 2027, consistent with Banxico’s cautious reaction function.
Despite the market pricing in two Fed hikes this year, we see a potential sharp depreciation of the peso as the main trigger for renewed tightening by Banxico.”
Meanwhile, Mexico’s Merchandise trade surplus narrows in May. The trade balance was USD +2.3 billion, following a USD +4.5 billion figure in the previous month. Over the last 12 months, the trade balance summed to USD +5.6 billion.
Merchandise exports were up 25.4 percent in annual terms in May, coming on the back of 32.6 percent growth in the prior month and driven by higher manufacturing, mining and oil exports. Merchandise imports rose 24.0 percent in annual terms in May, following 24.1 percent growth in the prior month.