Bank of Mexico Cuts Interest Rate in Split Vote, Ending Easing Cycle

• The Bank of Mexico cut its benchmark interest rate in a split decision on Thursday, May 7, 2026, and said it ‌was ending an over two-year-long easing cycle as it balances concerns over above-target inflation with pressure to revive Mexico's slowing economy.
• "Looking ahead, the Governing Board estimates that it will be appropriate to maintain the reference rate at its current level," the central ⁠bank, also known as Banxico, said in a statement announcing the decision.
• The 25-basis point cut brings the rate to 6.50%, its lowest since May 2022. The 3-2 decision by the Central bank’s five-member board had been largely expected, bolstered by data released earlier on Thursday showing headline inflation slowed in April for the first time since December.
• Consumer prices in Latin America's second-largest economy rose 4.45% in the year through April, easing from March's 4.59% increase and below the 4.50% increase forecast by economists polled by Reuters. The closely watched ⁠core index, which strips out some volatile food and energy prices, also slowed to 4.26% from 4.45% in March and slightly below expectations of a 4.27% increase.
• Despite the recent easing, inflation remains well above the central bank's target of 3%. Analysts polled by Reuters said ahead of the decision that the cut ‌was ⁠likely to be the last for the foreseeable future, a view echoed by Bank of Mexico Governor Victoria Rodriguez, who recently said the central bank was "close to concluding the period of adjustments" to the interest rate.
• The bank's statement said the board members believe the current monetary policy is ⁠appropriately positioned to deal with risks stemming from the broader economic environment, including the conflict in the Middle East and its repercussions.

(Source: Reuters)