Forex▼ Bearish
Peso Tumbles as Banxico Cuts Rate to 10.50% in Split Vote
Markets now price roughly 100 bps of additional cuts ahead. The wider question is how quickly the Fed follows suit and whether the peso's carry premium holds.
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The Mexican peso weakened sharply after Banxico delivered a quarter-point rate cut to 10.50%, with one board member voting for a deeper half-point reduction. Governor Victoria Rodriguez and three other deputies backed the 25-basis-point move, while Deputy Governor Jonathan Heath voted for a 50-basis-point cut, according to the central bank statement Monday.
The decision pushed the peso to session lows around 18.25 per dollar, erasing gains from earlier in the day. The currency had firmed briefly after U.S. producer price data came in softer than expected, but the Banxico announcement reversed that move within minutes.
This marks the second consecutive cut from Banxico after it lowered rates by 25 basis points in August. The split vote signals growing divergence within the board over how quickly to ease as inflation trends lower. Mexico's headline inflation has decelerated from 4.69% in July to 4.66% in August, while core inflation dropped to 3.95% – the first time below 4% since early 2021.