Mexico | A stronger 2Q26 is unlikely to shift Banxico’s policy pause

Summary

Recent inflation data support what most Board members signaled earlier this year—that a neutral stance is enough to bring disinflation across the finish line.

Key points

• Key points:
• We expect Banxico to keep the policy rate unchanged at 6.50% this week and to reiterate its message that the current stance will remain in place for an extended period.
• Mexico’s economy rebounded in 2Q26 after contracting in the first quarter, but weak underlying domestic demand casts doubt on a sustained recovery.
• The moderation in core services inflation ex housing and tuition further confirms that weak domestic demand is gradually filtering into sticky inflation components.
• The Board will likely resist preemptive hikes—even if the Fed tightens soon—given the divergent domestic demand cycles in Mexico and the US.
• We think the likely temporary nature of the strong 2Q26 GDP rebound and the lingering labor market weakness will prevent the Board from adopting any hawkish tone.

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