Banxico Halts Rate Cuts, Lowers 2026 Growth Forecast to 1.1%

The Bank of Mexico (Banxico) released its first‑quarter 2026 report, announcing a pause in the cycle of interest‑rate cuts and keeping the benchmark policy rate at 6.50%. In the same report the central bank cut its outlook for real GDP growth in 2026 from 1.6% to 1.1%, citing weaker-than‑expected activity in the first quarter, a reversal in industrial output and a decline in services.

Banxico said inflation remains a key risk, driven by higher energy prices, geopolitical tensions in the Middle East, and uncertainty from U.S. trade and monetary policy. While the underlying price growth has moderated, it stays above the 3% target and the risk balance is tilted to the downside. The bank indicated that with the real short‑term rate already close to its neutral level, there is little room to lower rates further without abandoning a restrictive stance.

The decision is expected to affect households and businesses: credit, mortgage and credit‑card rates are likely to stay unchanged in the near term, reducing the chance of rapid financing‑cost reductions for borrowers. Conversely, higher policy rates keep returns on savings and short‑term deposits attractive.