Background on the Mexican Economy and Banxico
The Bank of Mexico (Banxico) aims to maintain inflation at 3% and promote sustainable economic growth. Banxico’s monetary policy decisions significantly impact Mexico’s economy, influencing inflation rates and GDP growth. Understanding the latest projections from experts can help gauge the economic outlook for Mexico.
Inflation Projections
According to the latest Citi Expectations Survey, published on Tuesday, inflation in Mexico is expected to remain above Banxico’s 3% target until at least 2026, with a gradual moderation. Although the projections indicate a gradual moderation, analysts predict that both general and underlying inflation will stay above the target range until 2026.
- General Inflation: The median projection for general inflation at the end of 2025 decreased to 3.90% from 3.96% in the previous survey.
- Underlying Inflation: The underlying component, which excludes volatile prices like energy and fresh produce, remained at 4.20%.
- Future Projections: For 2026, the general inflation expectation is projected at 3.80% annually, and underlying inflation at 3.80%, slightly higher than the previously estimated 3.78%.
- Monthly Inflation: For October, a monthly inflation rate of 0.45% and an annual rate of 3.66% are expected, just below September’s 3.76%. Underlying monthly inflation is projected at 0.28%, keeping the annual rate at 4.28%.
Monetary Policy and Interest Rates
Despite persistent inflation, market consensus anticipates that Banxico will continue its monetary policy easing cycle in November, reducing the benchmark interest rate by 25 basis points.
- Interest Rate Adjustment: Thirty-six out of thirty-seven analysts surveyed by Citi expect the adjustment to occur in November 2025, while only one anticipates it will happen in December.
- Reference Rate Projections: The median projection for the reference rate at the end of 2025 remains at 7%, unchanged from the previous survey. Five participants estimate it will close at 7.25%.
- Future Expectations: For 2026, the median expectation is maintained at 6.5%, with estimates ranging between 6% and 7%.
Exchange Rate Projections
Citi emphasizes that exchange rate projections remain firm and stable, reflecting the market’s expectation that the Mexican peso will maintain its value against the US dollar in the coming years.
- Exchange Rate Projections: Market consensus continues to project an exchange rate of 19.00 pesos per US dollar by the end of 2025 and 19.50 pesos per US dollar by the end of 2026.
Economic Growth Expectations
Parallel to inflation projections, economic growth expectations show stable behavior with no significant changes compared to the previous survey.
- GDP Growth Projections: The median estimation for GDP growth in 2025 remains at 0.5%, with a range of -0.1% to 0.8%. For 2026, the median projection is 1.3%.
Key Questions and Answers
- What is the current inflation outlook in Mexico? Inflation is expected to remain above Banxico’s 3% target until at least 2026, with a gradual moderation.
- What are the projected inflation rates for 2025 and 2026? For 2025, general inflation is expected at 3.90% and underlying inflation at 4.20%. For 2026, general inflation is projected at 3.80% and underlying inflation at 3.80%.
- When is Banxico expected to adjust interest rates? Market consensus anticipates that Banxico will continue its monetary policy easing cycle in November 2025, reducing the benchmark interest rate by 25 basis points.
- What are the projected exchange rates for the Mexican peso? Market consensus projects an exchange rate of 19.00 pesos per US dollar by the end of 2025 and 19.50 pesos per US dollar by the end of 2026.
- What are the GDP growth expectations for Mexico? The median estimation for GDP growth in 2025 is 0.5%, with a range of -0.1% to 0.8%. For 2026, the median projection is 1.3%.
