Three of five board members backed the quarter-point cut, and the central bank says it will now hold the rate steady for a prolonged period.

This article by Braulio Carbajal originally appeared in the November 5, 2026 edition of La Jornada, Mexico’s premier left wing daily newspaper.

Mexico City. The Governing Board of the Bank of Mexico (BdeM) decided by majority to lower by a quarter of a percentage point the target for the overnight interbank interest rate, which stood at 6.25 percent effective November 6, after judging that the disinflationary process has continued and that no demand pressures are perceived in the economy.

Victoria Rodríguez Ceja, José Gabriel Cuadra García and Omar Mejía Castelazo voted in favor of the cut. Galia Borja Gómez and Jonathan Heath came out in favor of keeping the rate at 6.50 percent. The decision was made with all members of the Board present, which described it as a one-time adjustment.

The central bank noted that in the third quarter of 2026 the economy continued to expand.

Between the first half of September and the first half of October, headline inflation rose from 3.42 to 3.62 percent, the result of an increase in non-core inflation. Core inflation fell marginally from 3.79 to 3.78 percent in that period.

Headline inflation forecasts were revised upward for the fourth quarter of 2026, mainly due to higher-than-anticipated levels of non-core inflation. For that quarter the BdeM projects 3.7 percent for headline inflation, compared with 3.5 forecast on September 24, and 3.7 for core, compared with 3.6.

The expectation that headline inflation will converge to the target in the fourth quarter of 2027 is maintained. For the four quarters of 2027 the central bank forecasts headline inflation of 3.4, 3.3, 3.2 and 3.0 percent, unchanged from its September estimate, and core inflation with the same trajectory. These forecasts, the central bank specified, are subject to various risks.

As upside risks for inflation, the Board pointed to the persistence of core inflation, a greater depreciation of the peso, disruptions from trade policies or an inflationary impact from geopolitical conflicts, climate effects and cost pressures.

On the other hand, as downside risks it identified lower-than-anticipated economic activity in Mexico and the United States, a smaller pass-through of cost increases and lower pressures associated with episodes of appreciation of the national currency. It estimated that the balance of risks maintains an upward bias.

In the external environment, the document states that global economic activity would have expanded in the third quarter at a slightly slower pace than in the previous quarter. In several advanced economies headline inflation continued to rise due to higher energy prices.

Fed Kept Its Rates Unchanged

The Federal Reserve kept unchanged the federal funds rate range at its October meeting, and U.S. government rates declined at most maturities, although long-term rates reached multi-decade highs.

International financial markets continued to be volatile, the dollar showed limited variations and uncertainty persists over the conflict in the Middle East and its repercussions.

Since the previous decision, rates on government securities in Mexico fell at medium and long maturities and rose at short ones, while the Mexican peso depreciated. Economic policy changes by the U.S. administration and the possible prolongation of geopolitical conflicts, the Board noted, add uncertainty to the forecasts and could generate pressures on inflation in both directions.

Going forward, the central bank considers that keeping the rate at the level reached for a prolonged period will support the convergence of inflation to its target and will be adequate to face external macroeconomic challenges. Its decisions will take into account the observed and expected behavior of inflation, as well as the pass-through of the exchange rate to consumer prices.

The BdeM reaffirmed its commitment to its priority mandate and to the need to persevere in its efforts to consolidate an environment of low and stable inflation.

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