Banxico survey puts Peso near 18.40, projects rates at 6.50% through 2027

USD/MXN is expected to end the year close to the psychological 18.50 level, according to the Bank of Mexico’s October survey of private economists, released on Tuesday. Most analysts in the survey also raised their inflation forecasts.

At 3.88%, the median forecast for headline inflation in 2026 is marginally higher than September’s 3.87%, while the projection for 2027 stands at 3.85%. For core inflation, economists now expect a year-end reading of 3.82%, against 3.90% previously, with 3.82% also forecast for 2027.

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Economists have raised their 2026 growth forecast for Mexico to 1.50% from 1.40% a month earlier. For 2027, they expect the economy to expand by 1.83%, approaching the 2% level.

Banxico is expected to keep its policy rate at 6.50% for the remainder of 2026 and into 2027. The year-end USD/MXN forecast stands at 18.39, with the exchange rate projected to be around 18.64 in 2027.

Banxico: Key Questions Answered

What role does the Bank of Mexico play?

As Mexico’s central bank, the Bank of Mexico, also called Banxico, is responsible for setting monetary policy and safeguarding the value of the country’s currency, the Mexican Peso (MXN). Its primary objective is therefore to keep inflation low and stable within its target range. It aims for inflation at or near 3%, the midpoint of a tolerance band running from 2% to 4%.

Why does the Bank of Mexico’s monetary policy matter for the Mexican Peso?

Interest rates are Banxico’s principal monetary policy instrument. To curb inflation when it exceeds the target, the bank raises rates, increasing borrowing costs for households and businesses and thereby slowing economic activity. The resulting rise in yields generally supports the Mexican Peso (MXN), as it makes the country more attractive to investors. Lower rates, by contrast, typically weigh on MXN. A crucial consideration is the interest rate differential with the USD, which reflects how Banxico is expected to set rates relative to the US Federal Reserve (Fed).

How frequently does the Bank of Mexico hold policy meetings?

With US Federal Reserve (Fed) decisions exerting a strong influence on its monetary policy, Banxico’s decision-making committee generally convenes a week after the Fed. The Mexican central bank holds eight meetings a year, responding to, and at times anticipating, the Federal Reserve’s policy measures. Following the Covid-19 pandemic, for instance, Banxico raised rates ahead of the Fed. The move sought to reduce the risk of a sharp depreciation in the Mexican Peso (MXN) and avert capital outflows that could destabilise the country.