Mexico's Banco de México holds overnight rate at 6.50% after ending easing cycle

Banco de México held its target for the overnight interbank interest rate at 6.50% on Thursday 25 June, with the Governing Board voting unanimously to leave the benchmark unchanged.

It was the board's first decision since early May, when it cut the rate by 25 basis points to 6.50% in a move it described as a final adjustment. That cut was approved by a 3-2 majority, with Deputy Governors Galia Borja and Jonathan Heath preferring to keep the rate at 6.75%.

END OF THE EASING CYCLE

Banxico began lowering borrowing costs in March 2024 and delivered a cumulative 475 basis points of cuts across 15 meetings during the cycle, with 300 basis points of that total delivered in 2025. By comparison, the bank reduced rates by 425 basis points during its 2019–2021 easing cycle. The central bank signalled with the June decision that it intends to keep the rate at 6.50% for a prolonged period.

Headline inflation eased to 3.55% in the first half of June from 4.45% in April, while core inflation eased to 4.12% from 4.26%. Banxico kept its forecast for headline inflation at the end of 2026 at 3.50% and raised its year-end core inflation projection to 3.5% from 3.4%.

RISKS TILTED TO THE UPSIDE

The board said it expects inflation to converge to its 3% target by the second quarter of 2027. It said the balance of risks to inflation remains tilted to the upside, citing shifts in trade policy, geopolitical tensions and depreciation of the peso among the factors it is monitoring.