Mexican Peso: Restrictive Banxico stance supports MXN carry – Rabobank

Rabobank’s Molly Schwartz and Christian Lawrence note that Mexico's central bank, Banxico unanimously kept the overnight policy rate at 6.50% on August 6 and continues to judge the stance as appropriate. With inflation convergence now delayed to Q4 2027 and risks still skewed to the upside, they expect Banxico to remain on hold throughout 2026 and 2027.

Policy stance held steady

"Banxico announced its decision to hold the overnight policy rate at 6.50%, as was unanimously anticipated by Bloomberg surveyed analysts, including ourselves."

"Going into the meeting, Banxico Governor Cuadra said that he felt the “monetary policy stance is the right one at the moment,” and the Banxico statement went one step further, arguing that the Governing Board “judges that the monetary policy stance is well-suited to face the challenges posed by the macroeconomic environment, including those associated with the international context.”"

"We maintain our view that Banxico will hold the overnight policy rate at 6.50% through 2026 and 2027, and see USD/MXN trading sideways between 17 and 18 on a 12-month view, as comparatively higher rates in Mexico support MXN carry demand."

"Looking ahead, the Governing Board estimates that it will be appropriate to maintain the reference rate at its current level."

"With the presence of all its members, the Board decided unanimously to maintain the target for the overnight interbank interest rate at 6.50%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)