Publications

Banxico unanimously held its policy rate unchanged at 6.50% for a third consecutive meeting, maintaining its neutral tone but adopting a more cautious forward guidance. An orderly peso adjustment and minimal pass-through will be key as the rate spread narrows.

In July 2026, the growth of outstanding credit to the Non-Financial Private Sector (2.9% in real annual terms) remained near the year's highs, driven by consumer and business lending. Deposit growth slowed to 2.3% in real annual terms, reflecting a sharp slowdown in time deposits.

The FOMC unanimously raised the fed funds rate by 25 bps to 3.75-4.00%, underscoring its commitment to policy credibility. We expect only one additional 25bp increase, most likely in December. We then expect the Fed to remain on hold through 2027.

While far from a done deal, Warsh’s Fed has effectively cornered itself into a hike with its hawkish rhetoric. We now lean toward a 25bp rate hike aimed at preserving policy credibility, though a hold remains a distinct possibility.

The Central Reserve Bank of Peru kept the interest rate at 4.25% but adopted a more restrictive tone. It removed the conditionality for future adjustments, increasing the probability of a rate hike this year. Annual inflation rose to 4.4% in August, and 12-month expectations stand at 3.1%.

The ECB raised rates again while keeping all options open for what comes next. The meeting confirms that the return of inflation to target will take longer than previously expected and puts December increasingly in focus.

The 2027 economic package projects a gradual fiscal consolidation with a wide deficit of -3.9% of GDP. Despite fiscal prudence, challenges remain due to low tax collection and spending rigidity. Seeking revenue growth without a comprehensive reform limits fiscal space for more public investment.