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# Mexico's Banxico Cuts Key Rate to 6.75% in Split Vote
- URL: https://www.theglobalbanker.com/mexicos-banxico-cuts-key-rate-to-6-75-in-split-vote/
- Published: 2026-03-27T15:31:06.000Z
- Updated: 2026-10-24T12:23:50.000Z
- Description: Banco de México surprised markets by lowering its overnight interbank rate by 25 basis points to 6.75%, citing weak activity and external risks despite rising inflation. The board said it would evaluate the appropriateness and timing of an additional cut.
- Author: TGB Editorial Team
- Tags: Central Banks, Americas

Banco de México's Governing Board delivered a dovish surprise on March 26, 2026, lowering the target for the overnight interbank interest rate by 25 basis points to 6.75%, effective March 27, 2026\. The decision, reached by a narrow 3-2 majority, bucked widespread market expectations for a second consecutive hold, after the board paused in February following 12 straight cuts.

The board said continuing the cutting cycle was consistent with its assessment of the inflation outlook, even though headline inflation rose from 3.77% in early January to 4.63% in the first half of March because of the non-core component. The Governing Board decided by majority to lower the target for the overnight interbank interest rate by 25 basis points to 6.75%, the bank said in its statement. Board members Galia Borja and Jonathan Heath dissented, preferring to hold rates steady at 7.00%.

#### ECONOMIC WEAKNESS DRIVES DECISION

The board cited the weakness of economic activity and said that, as anticipated, there was no evidence of second-round effects from the tax measures adopted at the start of the year.

Core inflation remained practically unchanged at 4.46%, while headline inflation reached 4.63%. The bank still expects inflation to reach its 3% target in the second quarter of 2027, though it raised its headline and core forecasts for the first to third quarters of 2026\. Upside risks include external trade disruptions, geopolitical tensions, peso depreciation, and cost pressures, while downside factors encompass weaker growth and a stronger currency. "Since the previous monetary policy decision, Mexico's medium- and long-term government interest rates increased. The Mexican peso depreciated moderately," Banxico noted, capturing the domestic backdrop.

#### MARKET SURPRISE AND REACTION

The decision went against what most analysts and the market expected after inflation accelerated, though some, including BBVA, had forecast a cut. After the announcement the peso extended its losses, with the dollar touching 17.91 pesos, a depreciation of about 0.8%.

#### EASING CYCLE NEARS CLOSE

Banxico retained an easing bias, with forward guidance noting the board "will evaluate the appropriateness and timing for an additional reference rate cut" based on evolving conditions. The central bank indicated it would consider one more reduction, though no specific timeframe was provided.

The decision reflects Banxico's consideration of observed exchange rate levels, the weakness of economic activity, and the level of monetary restriction already implemented. The board also deemed that the monetary policy stance attained is adequate to face challenges posed by an extension and escalation of the Middle Eastern conflict. Mexico News Daily highlighted the cut "despite inflationary pressures".

#### OUTLOOK

The board said it would take into account the effects of all determinants of inflation and remain attentive to external conditions, and that the balance of risks to the inflation path remains tilted to the upside.