Bank of Mexico Holds Rate at 6.5% as Pause in Cuts Extends

The Bank of Mexico (Banxico) left its reference interest rate unchanged at 6.50% for the June policy meeting, signaling a prolonged pause after a series of cuts that began in March 2024. Analysts cite a slowdown in inflation, which fell to 3.94% in May, and lower energy prices, aided by the recent U.S.–Iran peace agreement, as key factors supporting the decision.

The rate hold narrows the differential between the peso and foreign currencies, reducing the appeal of carry‑trade positions and increasing MXN/USD volatility. UBS forecasts that while the pause may generate short‑term market fluctuations, especially amid ongoing T‑MEC negotiations, the peso is expected to remain resilient thanks to continued foreign investor interest and a favorable interest‑rate spread.