The Bank of Mexico (Banxico) released its Q1 2026 report, announcing a downward revision of its 2026 GDP growth forecast from 1.6% to 1.1%, attributing the change to a 'considerably weaker' first-quarter performance. The central bank also warned that investment could remain weak at least until the second half of 2026 [1]. In contrast, Banxico revised its 2027 GDP growth forecast slightly upward from 2% to 2.1% [1].
On the inflation front, Banxico maintained its headline inflation projection for Q4 2026 at 3.5% and kept its core inflation forecast for the same period unchanged at 3.4%. The bank expects inflation to converge towards its 3% target in the second quarter of 2027 but emphasized that inflation risks remain tilted to the upside [1].
Regarding monetary policy, Banxico officials stated that 'it will be appropriate to maintain the interest rate at its current level,' signaling no imminent changes to the policy rate [1].
In the currency markets, the USD/MXN pair traded up 0.27% following the report, as the US dollar erased some earlier losses. The pair appeared to have bottomed around 17.00 and was clearing the 20-day simple moving average, with buyers targeting the 17.50 level. The 200-day SMA at 17.90 and the psychological 18.00 mark were noted as further resistance levels [1].
CONCLUSION
Banxico's downward revision of the 2026 GDP forecast and its warning of persistent inflation risks have led to a modest strengthening of the US dollar against the Mexican peso. The central bank's decision to maintain current interest rates reflects a cautious stance amid ongoing economic uncertainty.