Banxico foresees more inflation in 2026. It decides to pause the interest rate cuts, keep it at 7% and once again postpones the convergence of inflation, to the 3% goal, for mid-2027. However, it warns that it will resume the scissors this year.
The central bank makes its resolution in an unprecedented context of questioning its credibility.
Alfredo Coutiño, director for Latin America at Moody’s Analytics (the research and consulting arm of the rating agency of the same name), and Ernesto Revilla, chief economist for Latin America at Citi, have questioned the monetary policy of the Bank of Mexico.
Coutiño’s public comments indicate that Banxico eroded its credibility by premature monetary relaxation in 2025, to boost the economy, without achieving full convergence to the 3 goal.
While Revilla has expressed that some credibility has been lost in Mexico’s monetary policy; Their forecasts lack predictive power and are not fully respected by the market.
Deputy Governor Jonathan Heath has recognized a “crisis of credibility” in inflation forecasts, both in journalistic interviews and in internal positions.
In addition to the harsh expressions of the analysts, the data is revealing.
3% goal, postponed nine times
The director of analysis at Banco Base, Gaby Siller, points out that Banxico has postponed convergence to the 3.1% inflation target nine times, since August 2021.
This month of February (2025) was postponed again to the second quarter of next year 2027.
Temporary halt to cuts
Banxico, under the critical gaze of the markets and analysts, decides not to make changes to the interest rate and modifies the message in its statement.
The members of the governing board of the Bank of Mexico predict more inflation for this year 2026. And they resolve, by unanimous decision, to pause the cycle of interest rate cuts; They keep it at 7 percent.
Banxico’s general and underlying inflation forecasts were adjusted upward for all quarters of this year.
And it again postponed until mid-2027, the fulfillment of the 3 percent inflation goal.
For the moment, the members of the Banxico Governing Board decided to remain expectant about the impact that the fiscal changes applied by the government and the behavior of the exchange rate will have, as well as the weakness of the economy and the monetary restriction.
However, the institute itself warned that it will make additional adjustments over the course of the year.
The new cuts depend on a clear and sustained decline in inflation, particularly core inflation.
Caution and inconsistency
Banxico’s message, when broadcasting its decision to keep the interest rate unchanged, reflects ambivalence.
On the one hand, it shows greater caution by recognizing, as it had not done until now, the persistence of underlying inflation.
It is also reflected in the modification of the horizon to achieve convergence in the inflation goal for next year.
For Siller, Banxico continues to be inconsistent because at the same time that it raises its inflation forecast for the rest of the year, it warns that it could continue cutting the interest rate.
This, when the interest rate has already been on neutral ground for several months and is not actively fighting inflation.
Governor Victoria Rodríguez Ceja and deputy governors Galia Borja, Omar Mejía, José Gabriel Cuadra and Jonathan Heath, have an enormous historical responsibility on their shoulders, the preservation and consolidation of the credibility of the institution.
At the time.
Glimpses
José Antonio Meade is the new president of the board of directors of HSBC México, led by Jorge Arce, also Mexican.
The experienced and prestigious economist was twice Secretary of the Treasury and Public Credit. He was also head of the Secretariats of Foreign Relations and Social Development, before being a candidate for the Presidency of the Republic.
Meade has numerous and valuable medals in the financial sector and international recognition.
At HSBC Mexico, Meade was already part of the board of directors since 2019 and in 2022 he was appointed as an independent non-executive director.
Meade and Arce, without a doubt, are a pair of very valuable assets for HSBC.
