Last Bank of Mexico Interest Rate Cut – Currency Thoughts

Last Bank of Mexico Interest Rate Cut

May 8, 2026

The Bank of Mexico’s interest rate cut announced later yesterday had been expected but was decided by the narrowest of margins, three ayes to two nos. The bank’s statement of explanation concedes “headline inflation expectations for the end of 2026 rose while those for longer terms remained relatively stable at levels above target. Headline inflation forecasts were revised upwards for the second and third quarters of 2026 due to higher levels of non-core inflation anticipated for that period. The Governing Board deemed appropriate to make an additional reference rate cut and thereby conclude the cycle that began in March 2024.” After 25-basis point rate cuts in both March and this month, the overnight interbank rate level sits at 6.5%, down from the peak of 11.25% that had been maintained for a whole year prior to the initial March 2024 reduction. CPI inflation crested at 8.7% in the third quarter of 2022, fell to as low as 3.5% last July, and currently is at 4.5%. The bank’s inflation target is 3%. The statement does not warn of future rate hikes, opining instead that “the monetary policy stance is well-suited to face the challenges posed by the macroeconomic environment, including those associated with an extension and escalation of the Middle Eastern conflict and its repercussions.”

Copyright 2026, Larry Greenberg. All rights reserved.

Tags: Bank of Mexico

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