- Banxico will announce its monetary policy decision today at 19.00 GMT.
- The Central Bank of Mexico is expected to cut interest rates at 50 basic points.
- The Mexican weight could experience volatility with the ad if any surprise occurs.
The Central Bank of Mexico (Banxico) will announce this Thursday, June 26 at 7:00 p.m. its monetary policy decision. The market awaits a 50 basic points cut (PB), which would place interest rates in 8% from the current 8.5%.
What factors will weigh about Banxico’s decision?
Mexico reached a 11.25% historical maximum in its interest rates in April 2023, and kept it at that level until February 2024. In March 2024, Banxico decided to start its cycle of cuts, although it stopped it until August, when it resumed the path of the flexibility of its Moentaria policy. Since the August meeting, the Central Bank has cut its types at all meetings, with 25 bp to December and 50 bp in February, March and May 2025.
The market today expects a new reduction of 50 basic points (PB), which would leave interest rates in 8.0%, its lowest level since June 2022. This decision would diverge the position of the United States Federal Reserve, which at the June meeting maintained a restrictive position waiting for the repercussions of the inflation of the tariffs of President Donald Trump.
The inflation From Mexico, it rose to 4.42% annually in May from 3.93% in April, while the underlying CPI also increased to 4.06% from the previous 3.93%. The general consumer price index reached its highest level in six months and could doubt Banxico about the convenience of a great magnitude.
Since the data of Mexican inflation were known and the conflict between Israel began and Iran with the intervention of the United States, the Mexican peso has strengthened against the dollar, leading to the USD/MXN at its lowest level in 2025 around 18.82.
Banxico will not only take into account inflation data at this meeting. It will also look at the Fedwhich decided to keep their interest rates unchanged at the June 18 meeting, leaving its types in 4.5% per fourth consecutive meeting. The words of Jerome Powell, president of the Fed, betting on waiting for the data to demonstrate that Trump’s tariffs do not affect inflation can influence Banxico.
On the other hand, there seems to be Division on the magnitude of the rate cut in the bosom of Banxico himself. The subgovernor of the Central Bank, Jonathan Heath, favorable in meetings prior to the cuts of 50 basic points, has been more prudent in recent days, assuring Reuters that “although I am something skeptical that inflation behaves as anticipates the official projection, support a more cautious and prudent approach until inflation converges towards our goal of 3%.”
In any case, according to a Reuters survey published last week, 21 of 26 economists predict that Banxico will cut the rates of 8.50% to 8.00% next week, although 15 participants indicated that Banxico could slow the relaxation rate in subsequent meetingsbeing August the following scheduled. Most of the economists surveyed expect the main interest interest rate of Mexico to remain at 7.50% in the third quarter of 2025.
How would a 50 bp of Mexican weight affect? What if the cut outside 25 bp or there were no changes in the rates?
The Mexican weight could experience a strong rebound in the improbable case that Banxico announces that interest rates does not vary, causing the USD/MXN to break the minimum of current 2025 in 18.82, descending towards the 18.40 area, where the minimum of August 2024 are below, below, the pair would have space to fall towards the psychological level of 18.00.
In the event that the reduction out of 25 basic points, we would also see a rise in the Mexican weight, although not as strong, pointing as the first objective of the USD/MXN the area of ​​18.60/18.65, where the minimum of the last ten months is.
If the ad coincides with the consensus of cutting of 50 basic points, the weight should not vary much its price, since the market discounts this decision. In any case, the focus would then be in case the statement advances new cuts for the next meeting or suggests a pause.
BANXICO FAQS
The Bank of Mexico, also known as Banxico, is the central bank of the country. Its mission is to preserve the value of the Mexican currency, the Mexican weight (MXN), and set the monetary policy. For this, its main objective is to maintain low and stable inflation within the target levels – in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%.
The main Banxico tool to guide monetary policy is the fixation of interest rates. When inflation is above the goal, the bank will try to control it by raising the rates, which makes the debt of homes and companies more expensive and, therefore, cools the economy. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN. The rate differential with the dollar, or the way in which Banxico is expected to set interest rates compared to the United States Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year and its monetary policy is very influenced by the decisions of the United States Federal Reserve (Fed). Therefore, the decision -making committee of the Central Bank usually meets a week after the Fed. In this way, Banxico reacts and sometimes anticipates the monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised the rates, Banxico first did it in an attempt to reduce the possibilities of a substantial depreciation of the Mexican weight (MXN) and avoid capital outputs that could destabilize the country.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
