Mexico’s central bank cut its benchmark rate by 25 basis points to 6.25%, contrary to market expectations, and signaled it would hold the rate at that level for an extended period. It raised its fourth-quarter 2026 inflation forecasts and maintained its view that inflation will reach its 3% target in late 2027.
Banxico cut its benchmark interest rate by 25 basis points to 6.25% in what it called a “one-time adjustment.” Markets had expected the five-member board to leave rates unchanged; Victoria Rodriguez, Gabriel Cuadra and Omar Mejia voted for the cut, while Galia Borja and Jonathan Heath favored holding the rate steady.
The central bank said maintaining the policy rate at the new level for an extended period would support inflation’s convergence to its target and help address external macroeconomic challenges. It raised its fourth-quarter 2026 headline inflation forecast to 3.7% from 3.5% and its core inflation forecast to 3.7% from 3.6%, while retaining its view that inflation will reach its 3% target in the fourth quarter of 2027.
Mexico’s economy grew faster than expected in the third quarter, and the government expects growth of nearly 2% in 2026. Banxico said economic slack and downside risks to activity are expected to persist, while changes in U.S. policy and possible escalation of geopolitical conflicts could put pressure on inflation in either direction. Annual headline inflation was 3.62% in the first half of October and core inflation was 3.78%.
