Banxico Holds Rates Steady as Peso Continues Downward Slide

Mexico's central bank, Banxico, has held its benchmark interest rate at 6.50% for the third consecutive meeting, indicating that it has decoupled from the U.S. Federal Reserve. The decision was unanimous and taken after assessing the peso exchange rate, the economic cycle between Mexico and the United States, inflation pressures, and monetary restrictions.

Although Banxico made adjustments to its short-term inflation forecasts, it still expects the overall indicator to converge to the target in the fourth quarter of 2027. The bank reaffirmed its commitment to maintaining a low and stable inflation environment.

José Luis Ortega, an analyst at BlackRock Mexico, believes that Banxico's next move would be difficult if the Fed raises rates more than twice overall. He suggests that the key signal to monitor is primarily the exchange rate, which has continued weakening against the U.S. dollar.