Banxico lowers overnight interbank rate to 6.75 percent
Banco de México's Governing Board decided to lower the target for the overnight interbank interest rate by 25 basis points to 6.75 percent. This decision, announced on March 26, 2026, is effective March 27, 2026.
Easing cycle continues amid global headwinds
Banco de México's Governing Board decided by majority to lower the target for the overnight interbank interest rate by 25 basis points to 6.75 percent.
This continues the rate-cutting cycle, consistent with the current inflationary outlook, observed exchange rate levels, economic activity weakness, and the implemented monetary restriction.
Globally, economic activity in Q1 2026 grew faster than the previous quarter, and major advanced economies saw headline and core inflation decrease.
The Federal Reserve maintained its federal funds rate in March.
However, the Middle Eastern conflict introduced volatility in international financial markets, increasing commodity prices and US government interest rates, while the US dollar appreciated.
Domestically, Mexico's medium- and long-term government interest rates rose, and the Mexican peso depreciated slightly, with significant economic weakness at the start of 2026.
Inflation outlook faces upside risks
Between January and March 2026, headline inflation increased from 3.77 percent to 4.63 percent, driven by its non-core component, while core inflation remained stable at 4.46 percent.
The Board noted no evidence of second-round effects from recent fiscal measures.
However, headline inflation expectations for end-2026 rose, with longer-term expectations remaining above target.
Headline and core inflation forecasts for Q1-Q3 2026 were revised upwards, mainly due to a higher non-core inflation trajectory and a slower decline in services inflation.
Headline inflation is still projected to converge to the 3 percent target by Q2 2027.
Risks to the inflation trajectory remain biased to the upside, including geopolitical conflicts, cost pressures, and potential Mexican peso depreciation.
Downside risks include lower economic activity and a stronger national currency.
Divided board, cautious easing
The majority decision to cut rates, despite rising near-term inflation expectations and persistent upside risks, signals a cautious approach to supporting economic activity.
The split vote underscores internal disagreement on the appropriate timing for easing given the complex global and domestic backdrop.
While aiming for convergence by Q2 2027, the path remains challenging, potentially requiring further adjustments if upside risks materialize.