Mexico Central Bank Holds Rate at 6.5%, Delays Inflation Target Return

• Banco de Mexico (Banxico) Mexico's central bank, held its benchmark interest rate at 6.50% on Thursday, ​extending a pause that began in June and pushing back the ‌timeline for inflation to return to target. This underscores the challenge of taming price pressures in Latin America's second-largest economy.
• This decision was ​in line with market expectations and said it would likely maintain ​the current setting for now. "Both headline and core inflation are still ⁠expected to decline throughout the forecast horizon, albeit more gradually than previously ​anticipated," the bank said in its policy statement.
• Banxico left its 2026 forecasts for ​both headline and core inflation unchanged at 3.5% but said headline inflation would now converge to its 3.0% target only in the fourth quarter of 2027, later than the second ​quarter of 2027 projected previously.
• This delay pointed to stubborn underlying price pressures as a key inflation risk. Other risks include possible trade disruptions, global conflicts, climate-related shocks, rising business costs and the chance of a weaker peso. It also said changes in U.S. policy and worsening international tensions were making the outlook harder to predict.
• Mexico's economy rebounded in the second quarter after contracting in the prior three-month period. Preliminary data released last week ⁠by statistics agency INEGI showed gross domestic product grew 1.5% ​in the second quarter from the previous quarter, after a 0.6% contraction in the first quarter.

(Source: Reuters)