Mexico: Central Bank holds rates in August
Latest bank decision: At its meeting on 6 August, the Central Bank decided to hold the target for the overnight interbank interest rate at 6.50%, after total cuts of 475 basis points since early 2024.
Bank in wait-and-see mode: The decision to hold was driven by a desire to assess the impact of past rate cuts, against a backdrop of moderate economic activity and headline and core inflation which are currently within the Bank’s 2.0–4.0% target range.
Rates to stay on hold: After substantial monetary easing over the last couple of years, our Consensus is for the Central Bank to not make any further interest rate cuts in 2026. This aligns with the Bank’s own forward guidance.
Panelist insight: On the outlook, Goldman Sachs’ Alberto Ramos said:
“The balance of risks for inflation remains skewed to the upside and for growth to the downside. The MPC expects the economy to operate with slack (idle capacity) over the forecasting horizon. Given the central bank’s majority focus on weak growth, we are of the view that despite the on-hold guidance the MPC could entertain additional rate cuts after the summer if the economy remains weak, MXN well-anchored, and the FOMC remains on hold. Conversely, were the FOMC to hike, the MPC would likely face unfavorable policy trade-offs given the tight Mexico-US interest rate differential, but the bar to follow the Fed and hike is high, absent major FX market pressures. At this juncture we expect the MPC to keep the policy rate unchanged throughout the remainder of 2026.”