Bank of Mexico Leaves Benchmark Interest Rate Unchanged — Update

By Anthony Harrup

MEXICO CITY--The Bank of Mexico left its benchmark interest rate unchanged for a second straight time Thursday, and reiterated its expectation that it will stay on hold for the foreseeable future.

The five-member board of governors voted unanimously to keep the overnight interest-rate target at 6.5%, a level it considered adequate to face domestic and external macroeconomic challenges. The decision to stay on hold was widely expected.

"Looking ahead, the governing board estimates that it will be appropriate to maintain the reference rate at its current level," the bank said.

The central bank said it expects inflation will continue to decline toward its 3% target but at a more gradual pace than previously foreseen. It now expects inflation to reach the target in the fourth quarter of 2027, instead of the second quarter of next year.

Inflation measured by the consumer price index stood at 3.10% in mid-July, with core inflation at 3.95%. The balance of risks to the inflation forecast remains tilted to the upside, the central bank said.

Capital Economics senior emerging markets economist Liam Peach noted a "slight hawkish shift in tone" as the central bank predicted a more gradual decline in inflation and moved sticky core inflation higher up the list of risks.

While board members appear confident that they can stay on hold for a prolonged period, "we think that Banxico may turn more hawkish into year-end amid the persistence of inflation pressures and Fed interest rate hikes," he said in a note. "As a result, we think the next move in rates is more likely to be a hike than a cut."

The Bank of Mexico noted the rebound in economic activity in the second quarter following a first-quarter contraction, but said significant downward risks to growth persist.

The central bank's focus on growth could lead the board to entertain interest-rate cuts after the summer if the economy remains weak, the Mexican peso stable, and the Federal Reserve stays on hold, Goldman Sachs's chief Latin America economist Alberto Ramos said in a note.

If the Fed were to raise interest rates, the bar for the Bank of Mexico to follow suit is high, Ramos said. "At this juncture we expect the [board] to keep the policy rate unchanged throughout the remainder of 2026."

Write to Anthony Harrup at anthony.harrup@wsj.com

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August 06, 2026 16:38 ET (20:38 GMT)