Citi Survey: Banxico to Hold Rates, USD/MXN Seen at 17.90 by End-2026

Citi Mexico’s latest survey of market expectations indicates that Banxico (Banco de México) will hold its key interest rate steady through the remainder of 2025, with the USD/MXN exchange rate projected to end 2026 at 17.90. The survey, conducted in early March 2025, reflects a consensus among analysts that the central bank will pause its easing cycle amid persistent inflation and global uncertainty.

Market Expectations and Policy Outlook

The survey, which pools forecasts from financial institutions and analysts, shows that most participants expect Banxico to maintain the benchmark rate at its current level of 10.50% at the next monetary policy meeting scheduled for March 27, 2025. This marks a shift from earlier expectations of further cuts, as inflation in Mexico has remained above the central bank’s 3% target, with headline inflation at 4.4% as of February 2025.

Analysts point to several factors supporting a hold: persistent services inflation, a resilient labor market, and the potential pass-through effects of recent minimum wage increases. Additionally, global financial conditions remain tight, with the U.S. Federal Reserve signaling a slower pace of rate cuts, which influences Banxico’s decisions.

USD/MXN Projection and Peso Dynamics

The survey’s median forecast places the USD/MXN exchange rate at 17.90 by the end of 2026, implying a modest appreciation of the Mexican peso from current levels around 18.20. This projection is based on expectations of continued foreign investment in Mexican assets, supported by nearshoring trends and a stable fiscal outlook, despite political uncertainties.

However, the peso remains sensitive to external shocks, particularly U.S. trade policy and commodity prices. The survey also indicates that analysts see the exchange rate averaging around 18.50 in 2025, with potential volatility around the midterm elections in the U.S. and domestic judicial reforms.

Implications for Investors and Businesses

For investors, a stable Banxico rate and a gradually appreciating peso could support carry trade strategies, but they also signal limited room for monetary easing, which may temper equity market enthusiasm. Businesses with cross-border operations should hedge against currency fluctuations, as the peso’s path is not linear.

The survey’s findings are particularly relevant for importers and exporters, as a stronger peso reduces import costs but can pressure export competitiveness. Companies with dollar-denominated debt will benefit from a firmer peso, while those relying on remittances may see reduced local currency receipts.

Conclusion

In summary, Citi Mexico’s survey points to a cautious Banxico that prioritizes inflation control over growth support, and a peso that is expected to strengthen modestly by 2026. While the projections are subject to change, they provide a useful baseline for policymakers, investors, and businesses planning for the medium term.

FAQs

Q1: What is Banxico’s current interest rate?
As of March 2025, Banxico’s benchmark interest rate stands at 10.50%. The Citi survey suggests the bank will hold this rate at its next policy meeting, with no cuts expected in the near term.

Q2: Why is USD/MXN projected to reach 17.90 by end-2026?
The projection is based on expectations of continued foreign investment, nearshoring benefits, and a stable fiscal framework, which should support the peso. However, external risks like U.S. trade policy could alter this path.

Q3: How reliable are these survey forecasts?
The survey reflects a consensus of analysts and financial institutions, but forecasts are subject to change based on economic data, global events, and policy shifts. They should be used as a reference, not as a guarantee.