Banxico Governor Rodriguez Says Rate Cut Has Been Under Consideration Since September – El Financiero

Interest rate cuts have been under consideration at Mexico’s central bank since September, Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja told El Financiero in an interview.

An unexpected 25 basis point cut last week brought Banxico’s interest rate down from 6.50% to 6.25%, following a 3-2 vote. Deputy Governors Galia Borja and Jonathan Heath favoured keeping rates unchanged as inflation continued to climb, although it remained within the 3% plus or minus 1% range.

Turning to the currency, she noted that it remained stronger than the average USD/MXN exchange rate recorded in 2025. She added: “The importance of exchange rate behavior under our free-floating regime lies in its potential impact on inflation. And we know that the pass-through of exchange rate fluctuations to consumer prices in Mexico is small. This is even more noticeable in an environment of slack.”

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

On the outlook for policy, she further said that “maintaining the rate at its current level – 6.25% – for an extended period will support the convergence of inflation to the target and will be adequate to address external macroeconomic challenges.”

Banxico: Key Questions Answered

What Role Does the Bank of Mexico Play?

As Mexico’s central bank, the Bank of Mexico, or Banxico, sets monetary policy and works to safeguard the value of the country’s currency, the Mexican Peso (MXN). Keeping inflation low and stable within its target levels is central to this mandate. The bank aims for inflation at or near 3%, the midpoint of its tolerance band of between 2% and 4%.

How Does Bank of Mexico Policy Affect the Mexican Peso?

Setting interest rates is Banxico’s primary monetary policy instrument. To contain inflation when it exceeds the target, the bank seeks to cool economic activity by raising rates, which increases borrowing costs for households and businesses. The resulting rise in yields generally supports the Mexican Peso (MXN), as it makes Mexico more appealing to investors. Lower rates, by contrast, typically put pressure on MXN. A crucial consideration is the interest rate differential with the USD, or the expected path of Banxico’s rates relative to those of the US Federal Reserve (Fed).

How Frequently Does the Bank of Mexico Hold Policy Meetings?

Decisions by the US Federal Reserve (Fed) have a strong bearing on Banxico’s monetary policy. The Mexican central bank holds eight meetings a year, with its policy-setting committee generally convening a week after the Fed. This allows Banxico to respond to Federal Reserve policy measures and, at times, anticipate them. Following the Covid-19 pandemic, for instance, Banxico raised rates ahead of the Fed to reduce the risk of a sharp depreciation in the Mexican Peso (MXN) and avert capital outflows that could destabilise the country.