Banxico minutes flag upside inflation risks from Middle East conflict
작성자 Christian Borjon Valencia
수정됨: 21 May 2026
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Banco de Mexico (Banxico) released its latest meeting minutes on Thursday, in which the Middle East conflict dominated the board's discussion.
Banco de Mexico (Banxico) released its latest meeting minutes on Thursday, in which the Middle East conflict dominated the board's discussion.
On May 7, Banxico cut rates by 25 basis points to 6.50% while telegraphing that it was the end of the easing cycle that began in 2024. The decision was not unanimous, with a 3-2 vote split, with Deputy Governors Galia Borja and Jonathan Heath voting for holding rates unchanged.
All the members of the board expressed that risks to inflation are tilted to the upside, due to the Middle East conflict, though they “argued that their direct impact on inflation in Mexico has been limited,” the minutes revealed.
Key highlights:
MOST BOARD MEMBERS AT BANXICO'S MAY MEETING CONSIDERED BALANCE OF RISKS FOR TRAJECTORY OF INFLATION REMAINS BIASED TO THE UPSIDE
ALL BANXICO BOARD MEMBERS HIGHLIGHTED THE UPWARD RISKS RELATED TO THE MIDDLE EAST CONFLICT
MOST BANXICO BOARD MEMBERS INDICATED THAT THE CONTRACTION OF ECONOMIC ACTIVITY WAS THE RESULT OF DECLINES ACROSS ITS THREE MAJOR SECTORS
MOST BANXICO BOARD MEMBERS MENTIONED THAT ECONOMIC ACTIVITY IN MEXICO CONTRACTED DURING THE FIRST QUARTER NOTABLY GREATER THAN ANTICIPATED
BANXICO'S BORJA: ADOPTING A CAUTIOUS APPROACH AND MAINTAINING THE CURRENT POLICY STANCE IS ADEQUATE TO HAVE MORE INFORMATION THAT ALLOWS US TO ASSESS MORE ACCURATELY THE INFLATIONARY OUTLOOK
BANXICO'S HEATH: THE NARROW MARGIN FOR FURTHER RATE CUTS AND FOR REDUCING THE DIFFERENTIAL WITH RESPECT TO EXTERNAL RATES, ALONG WITH AN ELEVATED UNCERTAINTY, JUSTIFIES PAUSE
BANXICO'S HEATH CITES SUSTAINED CORE INFLATION AS WELL AS PRICE SHOCKS, MILITARY CONFLICTS AND FISCAL ADJUSTMENTS
ONE BANXICO BOARD MEMBER SAID AS EVOLUTION OF PRICE SHOCKS IS STILL UNCERTAIN, UPSIDE RISKS TO INFLATION IN THE MEXICAN ECONOMY REMAIN CONTAINED
MOST BANXICO BOARD MEMBERS MOST MEMBERS POINTED OUT THAT SLACK CONDITIONS ARE EXPECTED TO CONTINUE WIDENING AND REDUCE INFLATIONARY PRESSURES
Banxico FAQs
The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.
The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.
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