Key interest rate held at 6.50 percent amid inflation risks
Banco de México's Governing Board voted unanimously to keep the target overnight interbank rate at 6.50 percent on August 6, 2026. Officials noted that inflation is expected to reach its 3.0 percent target by late 2027.
Target convergence delayed to late 2027
Between the first fortnight of June and July 2026, headline inflation decreased from 3.55 to 3.10 percent, driven by declines in both core and non-core components.
Core inflation fell from 4.12 to 3.95 percent over the same period.
Banco de México now projects that headline inflation will converge to its 3.0 percent target in the fourth quarter of 2027, reflecting a more gradual decline than previously anticipated.
The balance of risks for inflation remains biased to the upside due to persistent core inflation, geopolitical tensions, trade policy changes, and potential currency depreciation.
Economic activity rebounded in the second quarter of 2026 after contracting in the first quarter.
Global shocks and peso strength
The decision occurs against a volatile global backdrop marked by an escalation in the Middle East conflict and rising commodity prices.
The Federal Reserve maintained its target range for the federal funds rate at its July meeting.
While the US dollar depreciated globally, the Mexican peso appreciated since the previous meeting.
Mexican short- and medium-term government yields saw minor adjustments, whereas longer-term rates increased alongside rising US government yields.
Prudence over premature easing
Banxico rightly prioritizes inflation risks over domestic economic slack.
Pushing target convergence into late 2027 shows that disinflation progress remains fragile.
Maintaining 6.50 percent is a prudent anchor against external volatility.