Mexico | Banxico set to reiterate preference for a prolonged pause

Summary

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 as it continues to monitor services inflation.

Key points

• Key points:
• Last week, the Fed left rates unchanged at 3.50-3.75% and removed not only the easing bias, as expected, but also all explicit forward guidance.
• In Mexico, recent activity data suggest that the economy began 2Q26 on a somewhat firmer footing, although underlying demand conditions remain weak.
• While economic slack remains significant, Banxico is unlikely to place much weight on weak activity now that the policy rate has reached neutral.
• Soft labor market conditions should help contain demand-side pressures and support core services disinflation despite its persistent stickiness.
• Orderly financial market conditions and Banxico’s latest meeting minutes suggest that the Board will keep the policy rate unchanged.

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