Banxico Reaches the End of Its Easing Cycle
A Final Cut to 6.50%

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At its May 7 policy meeting, Mexico’s central bank (Banxico) lowered the policy rate by 0.25 point to 6.50%, the lowest level since April 2022. The vote split. Three of the five board members were in favor; the other two argued to hold. The statement added that keeping the rate at its current level would likely remain appropriate going forward. The easing cycle that began in March 2024 now looks effectively over.

Growth worries behind the cut

The main thing that pushed Banxico to cut was a first-quarter 2026 GDP that turned negative against the prior quarter. When the economy cools, demand-driven inflation pressure eases with it, and room to cut opens up. The latest April figures put headline inflation at 4.45% and core at 4.26%, both down slightly on the month. The 3% target is still some way off, but the direction points down.

At the same time, Banxico kept stressing the uncertainty ahead. A functioning USMCA with the United States is a support for the peso. But with U.S. tariff policy and geopolitical disruption still in play, Mexico’s export-dependent economy carries plenty of variables it cannot read. Banxico expects inflation to converge toward its target by the second quarter of 2027.

How to read the final move

At 6.50%, the rate still holds about two points positive in real terms against 4.45% inflation. The two members who argued to hold probably did not want to give up that real-rate cushion just yet. A high real rate draws in foreign capital and helps keep the peso steady.

How to land the end of an easing cycle while defending economic room and the currency: Colombia and Chile face the same problem, and for them Banxico’s call is a close-at-hand reference point. The decision to stop cutting is itself a message to markets about a disciplined central bank.

With two points of real rate still in hand, Banxico stopped. It ended the easing cycle by choosing not to make the final cut.

※ This article is the author’s commentary based on public information. Please confirm the latest figures, dates and procedures with governments and primary sources. Quotations are kept minimal and sources are cited.