Banxico Cuts Benchmark Rate to 6.5% in Split Vote, Signals End of Two-Year Easing Cycle

Mexico's central bank (Banco de México / Banxico) voted 3-2 to cut its benchmark overnight interest rate by 25 basis points to 6.5% — the lowest level since May 2022 — following April inflation data showing a first deceleration since December 2025. The governing board simultaneously signaled this cut marked the end of a two-year-plus easing cycle that had lowered rates from the August 2023 peak of 11.25%. Board members in the minority voted to hold rates, citing continued uncertainty over US tariff impacts on inflation and peso stability. The peso traded at approximately 17.31 per dollar in early May, representing significant strengthening from the 2025 average of approximately 19.20. The rate decision comes against a complex macroeconomic backdrop: while inflation is moderating and the peso has strengthened, Mexico's economy contracted in Q1 2026 (largest decline in over a year) with investment falling 6.6% in 2025. The Banxico decision was interpreted as a signal that monetary policy has done its work and that structural reforms — fiscal stimulus, investment promotion through Plan México Acciones — must now carry the weight of economic revival. The 6.5% rate still provides meaningful real interest rates above the approximately 4% headline inflation reading, preserving Mexico's financial stability credentials.