Banxico seen holding at 6.50% through 2027 – Citi Mexico Survey
On October 20, Citigroup Mexico released its survey, in which most private economists shared their expectations for Mexico’s economy.
Banxico to hold rates; USD/MXN forecasts upward revised
Regarding the Bank of Mexico – also known as Banxico – the central bank is expected to hold rates at 6.50% “through the end of 2027, with few participants anticipating any move.” For the end of 2026, the median forecast puts Mexico’s main interest rate reference at 6.50%, but for 2027, estimates range from 6% to 7.25%.
Meanwhile, the USD/MXN exchange rate is expected to be at 18.20 towards the end of 2026, up from 18.00 in the previous survey. For 2027, the USD/MXN is expected to end at 18.60, “with expectations ranging from 17.00 to 19.80.”
Of note, at the time of writing, the exotic pair trades at 18.64, an indication that the carry trade continues to wane.
Regarding inflation, towards year-end, headline inflation is forecast at 3.90%, unchanged from the previous poll. Underlying inflation is expected to decrease from 3.88% to 3.80%. For 2027, the headline inflation was revised upwards from 3.83% to 3.86%, and the core reading is projected to remain unchanged at 3.80%.
Expectations for Mexico’s Gross Domestic Product (GDP) for the end of 2026 were kept unchanged from the previous poll at 1.4%. For 2027, the median projection is for the economy to grow 1.8%, with projections ranging from 1% to 2.1%.
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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