Central Bank cuts rates in March

Latest bank decision: At its meeting on 26 March, the Central Bank decided to cut the target for the overnight interbank interest rate by 25 basis points to 6.75%, following 425 basis points of rate cuts from early 2024 to December 2025.

Weak economy and expected inflation decline drive decision: The decision to cut was partly aimed at shoring up the economy, with the Bank highlighting in its statement that “economic activity showed significant weakness at the beginning of 2026”. In addition, the Bank expects headline and core inflation to converge to the center of the 2.0–4.0% target range over the coming year, providing the leeway to cut rates.

Central Bank to ease further: Most panelists see more interest rate cuts by the end of this year, though future monetary easing will be more modest than in 2024 and 2025. U.S. trade policy towards Mexico and the incidence of conflict in the Middle East on domestic inflation are key risks factors.

Panelist insight: On the outlook, Itaú Unibanco analysts said: “The tone of the statement—highlighting that the rate cut is appropriate "on this occasion" and introducing the singular "an additional reference rate cut"—suggests that the rate-cutting cycle is nearing its end. In our view, Banxico's decision reflects a prioritization of domestic economic conditions over inflationary risks stemming from the geopolitical conflict. We continue to expect an additional rate cut this year.” BBVA analysts said: “We think the timing of the final rate cut will depend on external conditions. Under our baseline of a short-lived conflict, and with Banxico’s test for second-round effects from this year’s fiscal changes now met, most Board members may prefer to wrap up the easing cycle and deliver a final 25bp cut in May.”

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