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May 7, 2026. The Bank of Mexico (Banxico) met expectations in its May 2026 monetary policy decision. This Thursday, the central bank opted to extend the cycle of interest rate cuts by lowering them by 25 basis points (bps), bringing them to 6.50%. It also announced the end of the current monetary easing cycle.
The decision was split: Victoria Rodríguez Ceja, José Gabriel Cuadra García, and Omar Mejía voted in favor; while Galia Borja Gómez and Jonathan Heath voted to maintain the rate at 6.75%.
This move was widely expected by most analysts and the market, especially after the slowdown in inflation observed in April and the uncertainty surrounding the war in Iran. With this move, the monetary authorities confirmed that they have concluded the cycle of interest rate cuts.
"The Governing Board deemed it appropriate to make an additional cut to the benchmark interest rate, thereby concluding the cycle that began in March 2024. This decision is consistent with the assessment of the current inflation outlook. The Board considered the observed exchange rate levels, the weakness shown by economic activity, which implies an absence of demand pressures in the economy, and the degree of monetary tightening that has been implemented," the monetary authorities explained in the announcement.
In their forward guidance, the monetary authorities considered it appropriate to maintain the benchmark interest rate at its current level.
"(The Governing Board) judges that the monetary stance is adequate to address the challenges of the macroeconomic environment, including those arising from a prolonged and escalating conflict in the Middle East and its repercussions," the announcement read.
The Mexican peso's reaction has been limited, although it has resumed gains after experiencing slight losses against the US dollar shortly before the decision. Thus, the exchange rate remains at around 17.24 pesos per dollar.
Inflation Forecasts
Banxico made slight upward adjustments to its headline inflation forecasts for the next two quarters, although it clarified that it continues to anticipate headline inflation converging to the target in the second quarter of 2027.
The Governing Board considered that the balance of risks to the projected inflation path over the forecast horizon remains tilted to the upside.
"Changes in economic policy by the U.S. administration and the intensification of geopolitical conflicts continue to add uncertainty to the forecasts. Their effects could put upward pressure on inflation," they said.
Upside Risks
- Disruptions from trade policies or an inflationary impact from geopolitical conflicts
- Persistent core inflation
- Cost pressures
- A tendency toward depreciation of the Mexican peso
- Weather-related impacts
Downside Risks
- Weaker-than-expected economic activity in Mexico and/or the United States
- Reduced pass-through of cost increases
- Reduced pressures from the appreciation of the Mexican peso since last year
https://mx.investing.com/news/economy-news/fin-de-los-recortes-banxico-anuncia-la-ultima-bajada-a-tasas-se-quedan-en-650-3603666
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