Mexico Economics Weekly: Stable rate ahead

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Mexico Economics Weekly: Stable rate ahead

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18 Jun 2026 11:49:31 ET │ 21 pages

Mexico Economics Weekly

Stable rate ahead

CITI'S TAKE

Julio Cesar Ruiz AC

Next week’s Banxico monetary policy decision will likely confirm the Board’s +52-55-8421-6833

desire to keep rates stable via a neutral stance. While markets are pricing a julio.ruiz@citi.com

near full 25bps rate hike by the end of this year, we believe the bar for a rate

hike remains high. Signs of de-escalating geopolitical conflict, with no Felipe Juncal AC

evidence of second-order effects on inflation amid disinflationary drivers at felipe.juncal@citi.com

play (weak activity and a resilient currency), are supportive of this view. We

think the risk could be tilted more toward lower rates, considering also the

dovish bias of most Board members, though a hawkish Fed is a relevant

deterrent. Our base case is for the policy rate to remain unchanged at 6.5%

for the rest of the year.

Inflation — We expect biweekly headline and core inflation for the first half of June

at 0.01% and 0.24%, respectively. Our price trackers indicate downside pressure

from non-core fruit and vegetable prices. We highlight that the price pressure on red

tomatoes is continuing to ease (see our price tracker in the Week Ahead section

below). On the core inflation side, we see some temporary upward pressure (above

historical median) in the other services index due to the global summer soccer

tournament. Headline and core annual inflation should reach 3.67% and 4.17%,

respectively.

Activity — Internal demand data revealed that the weakness in activity in 1Q26 was

due to private consumption and investment. We adjusted our growth forecast for

private consumption to 1.7% for 2026 (from 2.6%) and for investment to –1.7% (from