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Economy March 30, 2026

Banxico Signals Rate-cut Cycle Nearing End, Governor Says

Victoria Rodriguez defends recent 25bp cut and warns upside inflation risks remain amid volatile food costs and geopolitical tensions

By Ajmal Hussain
Banxico Signals Rate-cut Cycle Nearing End, Governor Says

The governor of the Bank of Mexico indicated that the central bank may be close to finishing its sequence of interest-rate reductions, defending last week's 25 basis-point cut to 6.75% made in a narrow 3-2 vote. She attributed a recent uptick in headline inflation to temporary volatility in fruit and vegetable prices but acknowledged that risks are tilted to the upside because of Middle East conflict and shifts in U.S. economic policy. Banxico still projects inflation will converge to its 3% target by the second quarter of 2027.

Key Points

  • Banxico reduced its benchmark rate by 25 basis points to 6.75% in a 3-2 decision, with a slim majority favoring the cut to stimulate the economy.
  • Annual headline inflation rose to 4.63% in early March, above Banxico's 2%-4% tolerance range, driven in part by volatile fruit and vegetable prices.
  • Governor Rodriguez said policymakers are close to concluding the adjustment phase for the benchmark rate but warned risks to inflation remain tilted upward due to Middle East conflict and changes in U.S. economic policy.

The Bank of Mexico appears to be approaching the end of its recent easing cycle, Governor Victoria Rodriguez said in an interview published on Monday. Rodriguez defended the central bank's decision last week to reduce its policy rate even as inflation showed signs of acceleration.

In remarks to El Financiero, Rodriguez said:

"When assessing the inflation outlook and the evolution of its determinants, I believe we are close to concluding the period of adjustments to the benchmark interest rate."

Last week Banxico lowered its benchmark interest rate by 25 basis points to 6.75%. The decision was reached in a divided 3-2 vote by the five-member board - a result that the central bank said was one of the most closely watched and uncertain policy decisions in recent years. The slim majority favored the cut as a step that could support economic activity, while the dissenting members highlighted concerns about rising inflation.

Annual headline inflation in Mexico climbed to 4.63% in early March, a reading that Rodriguez noted was the highest since 2024 and above Banxico's tolerated range of 2% to 4%. She described that increase as a temporary blip primarily caused by volatility in fruit and vegetable prices.

Despite characterizing the recent inflation spike as transitory, Rodriguez pointed to lingering upside risks. She specifically cited the war in the Middle East and developments in Iran as well as changes to U.S. economic policy as factors that leave the balance of risks to inflation tilted upward.

Nonetheless, Rodriguez restated the bank's forecast that headline inflation will converge to the 3% target in the second quarter of 2027. The governor's comments underline Banxico's cautious stance: willing to provide monetary easing to support activity while remaining mindful of inflationary pressures tied to food-price volatility and international uncertainties.

Contextual note: The interview comments followed the central bank's narrowly split decision to cut rates by 25 basis points to 6.75%, a vote described by officials as unusually close and closely watched.

Risks

  • Rising inflation - The acceleration to 4.63% and upside risks could pressure consumer prices and financial markets, particularly affecting fixed-income and currency-sensitive sectors.
  • Geopolitical volatility - The war in the Middle East and specific developments in Iran may push gas prices higher, which could amplify inflationary pressures in energy-exposed industries.
  • Food-price volatility - Short-term swings in fruit and vegetable prices could keep headline inflation elevated, impacting the agricultural sector and consumer purchasing power.

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