Bank of Mexico Holds Rates
Citing Inflationary Pressures
Mexico City — February 5, 2026
In a unanimous decision on Thursday, the Governing Board of Banco de México announced it will maintain the target for the overnight interbank interest rate at 7.00%. This move marks a pause in the central bank’s rate-cutting cycle, a decision the Board deemed consistent with its assessment of the current inflationary environment.
Inflation Forecasts Revised Upwards
The central bank’s decision was heavily influenced by the persistence of core inflation. While headline inflation decreased slightly from 3.80% to 3.77% between November 2025 and the first half of January 2026, core inflation rose from 4.43% to 4.47% during a similar period.
Because of a higher-than-anticipated trajectory for core inflation, the Board revised its headline and core inflation forecasts upwards for the period spanning the first quarter of 2026 through the first quarter of 2027. Banco de México now expects headline inflation to converge to its 3% target in the second quarter of 2027, rather than earlier estimates.
Domestic and Global Economic Context
Domestically, the Mexican economy showed signs of recovery, expanding in the fourth quarter of 2025 after a contraction in the third quarter. Additionally, the Mexican peso appreciated since the previous monetary policy decision, and government interest rates decreased across all terms.
However, the global economic backdrop remains uncertain. The rate of expansion for world economic activity is estimated to have declined in late 2025, driven by an environment of persistent trade tensions. The Board also noted that the U.S. Federal Reserve kept its federal funds rate unchanged during its January meeting.
Risks and Future Outlook
The Governing Board identified several upside risks to their inflation forecasts, including the persistence of core inflation, cost-related pressures, potential exchange rate depreciation, and disruptions arising from geopolitical conflicts or foreign trade policies. While risks are considered closer to balance, they remain biased toward the upside.
In justifying the pause, the Board cited the need to continue evaluating the impact of fiscal adjustments implemented at the beginning of the year, alongside the behavior of the exchange rate and the weakness of economic activity.
Looking ahead, the central bank stated it will assess the need for additional reference rate adjustments based on the evolution of inflation determinants. The Board reaffirmed its commitment to ensuring the reference rate remains consistent with the trajectory required for the orderly and sustained convergence of headline inflation to the 3% target.
Press Release link