The rate cut follows significant progress in cooling inflation within Mexico. According to data from the national statistics agency INEGI, annual headline inflation fell to 3.55% in the first half of June, down from 3.94% in May. Banxico noted that between April and the first fortnight of June 2026, headline inflation decreased from 4.45% to 3.55%, driven by declines in both core and non-core components. Core inflation, which excludes volatile food and energy prices, dropped from 4.26% to 4.12% during the same period. The central bank expects core inflation to continue its downward trajectory in the second half of 2026, with a revised forecast of 3.5% for the final quarter, slightly higher than the previous outlook of 3.4%.
Banxico’s monetary policy committee voted unanimously to maintain the prior rate at 6.50% in an earlier meeting, having cut rates to that level in early May. However, the latest decision reflects a reassessment of the inflationary outlook. The board evaluated the observed levels of the exchange rate, the absence of demand-related pressures in the economy, and the level of monetary restriction implemented. While the bank targets 3% inflation, with a tolerance band of 2% to 4%, it anticipates headline inflation will reach 3.8% in the third quarter and 3.5% in the fourth quarter of 2026, before settling at 3.2% in the first quarter of 2027 and 3% in the second quarter.
Despite the easing signal, Banxico warned that its forecasts remain subject to various risks, including upside pressures from foreign trade policy disruptions, geopolitical conflicts, climate-related impacts, and a trend towards the depreciation of the Mexican peso. The decision comes as the central bank seeks to preserve the value of the currency while supporting economic activity. Higher interest rates are generally positive for the Mexican peso (MXN) by attracting foreign investment, whereas lower rates tend to weaken the currency. The next scheduled meeting will determine whether this easing cycle continues or if the bank reverts to a holding pattern as inflation approaches its target.
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