Central bank holds interest rates steady as peso slips toward its worst week since March
Banxico held its rate at 6.50% for a third straight meeting, signaling a split from the Fed, even as the peso weakened toward its worst week since March. The post Central bank holds interest rates steady as peso slips toward its worst week since March appeared first on Mexico News Daily
Mexico's central bank, Banxico, decided to keep its key interest rate at 6.50% for a third consecutive meeting on Thursday, signaling a clear separation from the U.S. Federal Reserve's recent rate hike. Banxico's Board of Governors aimed to avoid speculation about future moves, but noted that a more restrictive stance by the Fed could prolong the pause or lead to a rate increase next year.
The monetary policy decision was unanimous and based on a review of the peso exchange rate, Mexico's economic cycle divergence from the U.S., the lack of demand pressures in Mexico, and the extent of monetary restriction currently in place. Despite adjusting short-term inflation forecasts, Banxico anticipates overall inflation to align with the target by the end of 2027 and remains committed to low and stable inflation.
Banxico's forward-looking guidance indicates a desire for independence from the Fed, particularly for a potential rate cut, which would be challenging if the Fed continued to raise rates. The Mexican peso continued to decline against the U.S. dollar, with analysts projecting a fourth consecutive weekly loss and a worst week since March. The exchange rate was expected to remain sensitive to the interest rate outlook in both countries.
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