The Mexican peso has strengthened toward 17.4 per US dollar, reaching its highest level in more than a month amid a global shift away from safe-haven assets following President Trump’s decision to postpone infrastructure strikes by two weeks. Risk appetite has increased further as the recent plunge in oil prices has eased concerns about an energy-driven inflation shock to the Mexican economy.
Even with this external relief, Banco de México finds itself in a difficult position. Its Governing Board recently cut the policy rate by 25 basis points to 6.75% in a surprise 3–2 split decision. While core inflation has held relatively steady at around 4.46%, the latest Banxico survey indicates that private-sector analysts have revised their 2026 headline inflation forecasts upward to 4.21%.
Markets are now factoring in the possibility of one final rate cut to 6.5% later this year, as policymakers weigh upside inflation risks against a domestic manufacturing sector that continues to struggle with persistent contraction.
