The Mexican peso weakened to nearly 17.2 per US dollar, retreating from a more than two-year high of 16.98 reached on September 11th, after the US Federal Reserve raised interest rates. The Fed lifted the federal funds target range by 25 bps to 3.75%-4.00%, as widely anticipated, and most FOMC members signaled the likelihood of another increase later this year. This narrowing interest-rate differential is bolstering the US dollar.
At its August meeting, Mexico’s central bank (Banxico) left its benchmark rate unchanged at 6.50%, stating that inflation is expected to continue moderating gradually and to converge toward the 3% target in the fourth quarter of 2027. Banxico also noted that Mexico’s economy rebounded in the second quarter after contracting in the previous quarter, though it emphasized that downside risks to growth remain. The board reiterated that it expects to maintain the benchmark rate at its current level amid ongoing uncertainty related to geopolitical conflicts, global trade policies, and their potential impact on inflation.
