Banxico Holds Key Rate at 6.50% Amid External Risks

The Bank of Mexico, Banxico, has decided to keep its policy rate unchanged at 6.50%. This decision marks an extended pause in monetary easing, as inflation remains near target and real rates are close to neutral.

This move was widely expected by analysts, with Societe Generale's Dev Ashish stating that the bank now sees inflation converging to target in 4Q27. However, external risks from oil prices and a potentially hawkish Federal Reserve argue against further easing.

The Middle East-driven oil price risks and a potentially hawkish Fed reduce the scope for further policy easing. As a result, Banxico is expected to keep rates on hold for an extended period. The current growth-inflation mix and external backdrop justify a policy stance that is neither overtly accommodative nor restrictive.