Mexico's central bank, Banxico, unanimously decided to keep its overnight policy rate steady at 6.50% on August 6, a move that was widely anticipated by analysts surveyed by Bloomberg, including Rabobank’s Molly Schwartz and Christian Lawrence [1]. The Governing Board, with all members present, judged that the current monetary policy stance is well-suited to address macroeconomic challenges, including those arising from the international context [1]. Banxico Governor Cuadra reiterated that the monetary policy stance is appropriate at this time [1].
Rabobank analysts highlighted that the timeline for inflation convergence has now been delayed to the fourth quarter of 2027, with risks still skewed to the upside [1]. As a result, they expect Banxico to maintain the overnight policy rate at 6.50% throughout 2026 and 2027 [1]. The Governing Board also indicated that it will be appropriate to keep the reference rate at its current level going forward [1].
Rabobank projects that the USD/MXN exchange rate will trade sideways between 17 and 18 over the next 12 months, supported by comparatively higher rates in Mexico, which bolster demand for MXN carry trades [1]. No immediate market reaction or volatility was mentioned in the source, but the continued restrictive stance is seen as supportive for the Mexican peso [1].
CONCLUSION
Banxico’s decision to hold rates at 6.50% and its guidance for a prolonged restrictive stance are expected to support the Mexican peso through carry demand. With inflation convergence delayed and risks tilted upward, analysts anticipate no rate cuts through 2027, reinforcing a stable outlook for USD/MXN.