Background on Banxico and its Role
Banxico, or the Bank of Mexico, is the country’s central bank responsible for managing monetary policy and maintaining price stability. As an open economy, Mexico’s financial system is sensitive to international factors, including US interest rates.
Influence of International Interest Rates
Banxico recognizes that fluctuations in international interest rates, such as those set by the US Federal Reserve, can significantly impact capital flows, exchange rates, and financing costs within Mexico.
In its recent quarterly report, Banxico highlighted the importance of monitoring international financial markets and interest rates for informed policy-making decisions.
Correlation Between Mexican and Foreign Interest Rates
According to market analysts, Banxico acknowledges the correlation between Mexican interest rates and those of other developed countries, including the US, Italy, and Switzerland.
Using data from April 2020 to October 2025, Banxico economists found that the Mexican interest rate has a strong correlation (0.94 points) with US interest rates, indicating that both are influenced by common global economic and financial factors.
Although the second-highest correlation is with Swiss interest rates (0.92 points), Banxico emphasizes the primary influence of US interest rates on Mexican monetary policy decisions.
Impact on the Mexican Peso
Banxico Governor Victoria Rodríguez Ceja explained in her year-end press conference that low volatility levels have contributed to the formation of carry positions that benefit from the interest rate differential between Mexico and developed economies.
This has positively impacted the Mexican peso, which has appreciated by 13.9% year-to-date.
Key Questions and Answers
- Q: What role does Banxico play in Mexico’s economy?
A: Banxico is Mexico’s central bank responsible for managing monetary policy and maintaining price stability.
- Q: How do international interest rates affect Mexico?
A: Fluctuations in international interest rates, such as those set by the US Federal Reserve, can significantly impact capital flows, exchange rates, and financing costs within Mexico.
- Q: What is the correlation between Mexican and foreign interest rates?
A: Banxico acknowledges a strong correlation (0.94 points) between Mexican interest rates and US interest rates, indicating common global economic and financial factors influence both.
- Q: How has the Mexican peso been impacted?
A: Low volatility levels have contributed to the formation of carry positions that benefit from the interest rate differential between Mexico and developed economies, positively impacting the Mexican peso.
