Mexico’s central bank kept rates steady, signaling a prolonged pause, while markets price a 25bp hike by year-end amid inflation and growth data.
The Mexican peso weakened as USD/MXN climbed above 17.50 for the first time in three months, testing resistance near the 200-day moving average at 17.80. Banxico held its policy rate at 6.50%, adopting a neutral tone that suggests a longer pause in tightening.
Markets are pricing a modest 25 basis-point hike by year-end, despite mid-June inflation slowing to 3.55% and April economic activity surging 1.2% month-over-month. The central bank’s inflation projections remained largely unchanged. Near-term support for USD/MXN sits at 17.30, with a break above 17.80 seen as confirmation of a broader rebound.
The move comes ahead of an early-July USMCA review, adding to near-term volatility. Mexico also sold $6.3bn in two-part USD-denominated debt, reflecting ongoing fiscal dynamics.