Mexico Interest Rate

The Bank of Mexico lowered its key rate by 50 bps to 8.50% on May 15th, as annual inflation eased to 3.93% in April and the domestic economy registered a modest 0.2% quarter-on-quarter expansion after earlier weakness. The release indicated that the Board could continue calibrating similar 50 bps cuts, anticipating that the disinflation process will allow a further easing cycle while maintaining a restrictive stance. However, the central bank remains cautious amid elevated global uncertainty—ranging from US trade tensions to geopolitical conflicts—that could either reignite inflation via peso depreciation or deepen the economic slowdown. While progress towards the 3% inflation target is on track, with forecasts pointing to convergence by the third quarter of 2026, members underscored the importance of a flexible policy framework to manage inflation expectations and preserve financial stability, particularly given the peso’s recent appreciation.