Mexico's central bank raised its 2026 GDP outlook on "better-than-expected growth" in the last quarter of 2025, although uncertainty around US, Mexico Canada (USMCA) trade negotiations remains.
Banxico raised its 2026 growth estimate to 1.6pc from 1.1pc provided at the last quarterly report in November, and held its 2027 growth forecast unchanged at 2pc.
The bank cited statistics agency Inegi's revised estimate for fourth quarter 2025 GDP growth to an annualized 1.8pc from 1.6pc in its preliminary estimate, with growth in the agriculture sector revised to 7.8pc from the 6pc preliminary estimate.
"Looking ahead to 2026, we continue to anticipate some acceleration in the pace of economic growth, though … slack conditions are expected to prevail," said central bank governor Victoria Rodriguez in the latest quarterly report on 26 February.
This assumes "private consumption will increase," said Rodriguez, while "investment is forecast to remain weak, ... reflecting the prevailing uncertainty surrounding the trade relationship with the United States and the upcoming review of the [USMCA free] trade agreement."
The US, Mexico and Canada are set to hold a joint review on 1 July that could extend the treaty through 2036. Formal talks began in September and, while some milestones have been completed, key issues remain unresolved.
On 5 February, Banxico held its benchmark interest rate at 7pc, its lowest level since June 2022, pausing the rate-cut cycle after eight consecutive cuts that began in February 2025.
The bank's quarterly report held its 5 February forecasts for headline and core inflation unchanged, which convergence to the bank's 3pc target inflation rate for both metrics to the second quarter of 2027, three quarters later than the bank forecast in its November report.
Despite the latest pause in rate cuts, "We will consider further cuts to the benchmark interest rate, going forward," Rodriguez said, citing the recent strength of the Mexican peso-US dollar exchange rate, which was trading at Ps17.21:$1 as of 27 February.
With the report, Mexican bank Banorte maintained expectations that Banxico will issue a quarter-point rate cut at its 26 March meeting, with another cut likely before July to bring the rate to 6.5pc.
Mexico's inflation accelerated to an annual 3.79pc in January from 3.69pc in December, with core prices quickening to 4.52pc in January from 4.33pc the prior month on excise tax hikes introduced on 1 January.
