Banxico Survey: Private Economists Forecast Reduced Inflation in Mexico

On Wednesday, Banxico announced that private analysts lowered their inflation projections for the end of 2026 and revised their forecasts for economic growth, the exchange rate, and the interbank lending rate.

Headline inflation is projected at 4.20%, down from 4.35% in the prior survey, with core inflation expected to decline from 4.22% to 4.18%.

Economic growth is projected at 1.10% for 2026, unchanged from the previous estimate, with a 2027 outlook of 1.80%.

The USD/MXN exchange rate is expected to close at 17.95 this year, up from 17.85, and is projected to remain steady at 18.50 in 2027.

The interbank lending rate is expected to stay at 6.50% for the remainder of the year and into 2027.

Banxico FAQs

Banxico, Mexico’s central bank, is tasked with preserving the value of the Mexican peso and formulating monetary policy. Its primary goal is to achieve low and stable inflation at or near its 3% target, situated within a 2%–4% tolerance band.

Banxico’s primary tool for steering monetary policy is the setting of interest rates. When inflation exceeds the target, the bank raises rates to make borrowing costlier for households and businesses, thereby cooling the economy. Higher rates typically strengthen the Mexican peso (MXN) by offering greater yields to investors, while lower rates weaken the currency. The interest‑rate differential between Mexico and the United States—i.e., how Banxico’s policy rates compare with those of the Federal Reserve—is a critical determinant.

Banxico convenes eight times annually, and its policy is heavily influenced by the Federal Reserve’s decisions. The committee typically meets a week after the Fed, reacting to— and occasionally pre‑empting— Fed policy moves. For instance, prior to the Fed raising rates after the Covid‑19 pandemic, Banxico acted first to reduce the risk of a sharp peso depreciation and avert capital outflows that could destabilize the economy.

Source link