The Mexican peso closed on Wednesday, September 16 above 17.25 units per dollar, its highest level in six weeks, after the U.S. Federal Reserve raised its interest rate by 25 basis points to a range of 3.75% to 4%, its first increase since July 2023.
The hike was adopted unanimously by the 12 voting members of the Fed's Federal Open Market Committee. The decision narrowed the rate differential against Banco de México to a historic low of 250 basis points, according to Bloomberg Línea. Banxico has held its benchmark rate at 6.50% since its August 6 decision, which closed the cutting cycle that began in March 2024. That rate marks the cost of credit for millions of Mexican families and companies: mortgages, cards and business financing all follow the pulse of monetary policy. The dollar rose for a third consecutive day, according to the wholesale operations reported by El Universal Cartera.
The market is already pricing in a pause. The most recent Encuesta Citi de Expectativas shows that 25 of 37 analysts do not anticipate a move in the policy rate at the September 24 meeting, and the forecast for the end of 2026 remains at 6.50%. Mexico's headline inflation stood at 3.26% in August, within the variability range of 3% +/- one percentage point, while core inflation reached 3.88%, according to El Universal Cartera. For Marco Oviedo, senior strategist for Latin America at XP Investments, Banxico has room to hold the rate because the peso has remained strong. Calzada, an economics professor at UNAM, noted that an international environment of higher rates for longer translates into more expensive new credit, less aggressiveness from banks in cutting rates and a higher cost of financing.
The Fed's dot plot points to one additional increase before 2026 ends, while the Bank of Japan announces its own monetary policy decision tonight. The appointment for the Mexican market comes on September 24, when Banxico publishes its announcement and the market recalibrates its expectations for the rest of the year.
This article was written with the assistance of artificial intelligence based on verified sources and reviewed by a human editor before publication.