2026/04/09 | Julia Passabom & Mariana Ramirez
Banxico published the minutes from the March 26 monetary policy meeting, where the board cut the policy rate by 25 bps to 6.75% in a split decision. The central theme in the board members' remarks was their assessment of the excise tax and tariff shock on inflation. They viewed it as a one-off event with no second-round effects on inflation. Additionally, the board discussed will continue to closely monitor the conflict in the Middle East. The board considered that "the monetary policy stance attained is adequate to face the challenges posed by an extension and escalation of the Middle Eastern conflict and its outcome."
A dissenting vote from Galia Borja highlighted uncertainty about the implications of the Middle East conflict. She stated that with the current level of interest rates, it is possible to evaluate the evolution of both the inflation outlook and the current oil shock, contributing to maintaining expectations anchored. In parallel, also dissenting board member Jonathan Heath argued that the balance of risks for inflation has tilted significantly to the upside due to the conflict in the Middle East and agricultural shocks. He also noted that in the context of persistent core inflation and increasing non-core risks, lower interest rates could signal a reduced commitment by the board to its main objective.
We identify hawkish elements in the document: a divided vote, an upward adjustment to near-term inflation forecasts, the persistence of an upside bias in the risk balance, and services inflation declining more gradually than previously expected. Conversely, the dovish elements include the emphasis on the transitory nature of the excise tax and tariffs, the weakness in economic activity, and the acknowledgment that geopolitical developments could pose risks to both sides of the inflation balance. As such, in our view, the communication leans moderately dovish, as Banxico continues easing despite negative inflation surprises, but with caveats about uncertainty and risks.
Our take: The views confirmed the tone of the policy statement, suggesting that the rate-cutting cycle is nearing its end due to the phrases "an additional reference rate cut" and "on this occasion." Meanwhile, the inclusion of "the appropriateness and timing" makes the policy path more data-dependent. We also believe the minutes' remarks are consistent with our baseline scenario of an additional rate cut this year, leading to a terminal rate of 6.5% in 2026, with rates likely to remain at that level through 2027. The next monetary policy meeting will be held on May 7, and the quarterly inflation report will be published on May 27.