Banxico Diverges from US Monetary Policy

Mexico's central bank, Banxico, has decided to keep its policy rate unchanged at 6.50%, as expected.

In a statement, Banxico clarified that it will not mechanically follow the US Federal Reserve's monetary policy decisions due to differences in economic conditions between Mexico and the US.

The focus is now on the lagged benefits of easing and inflation trajectory, with Banxico likely keeping the current rate through the end of 2026.

The statement noted that since macroeconomic conditions in Mexico are different from those in the US, monetary policy would not have to react mechanically to the anticipated adjustments to the federal funds rate.

The inflation picture has provided some encouragement for Banxico, with core CPI continuing to come down over the last quarter, but the bank will be watchful for the prolonged effects of higher energy prices still feeding through in Q4 2026/Q1 2027.