--- source: Banco de México url: https://www.banxico.org.mx/publications-and-press/minutes-of-the-board-of-governors-meetings-regardi/%7BC34393F1-6F52-BDE9-ADF0-673D1C43F92E%7D.pdf document_type: pdf date_retrieved: 2026-04-09 period: Decision announced March 26, 2026 parent_publication: Monetary Policy Meeting Minutes indicators_covered: ["Interest Rate"] --- # Minutes of the Governing Board meetings regarding monetary policy decisions ## Minutes number 123 — Meeting announced March 26, 2026 Minutes number 123 Meeting of Banco de México's Governing Board on the occasion of the monetary policy decision announced on March 26, 2026 This document is provided for the reader’s convenience only. The translation from the official Spanish version was made by Banco de México’s staff. Discrepancies may possibly arise between the original document in Spanish and its English translation. For this reason, the original Minutes in Spanish are the only official document. FOREWARNING showed signs of cooling. He/she pointed out that This document is provided for the reader’s convenience labor demand in the United States moderated again only. The translation from the official Spanish version was in February. He/she added that during that month the made by Banco de México’s staff. Discrepancies may arise unemployment rate stood at 4.4%, after registering between the original document in Spanish and its English translation. For this reason, the original Spanish version is 4.3% in January. He/she expressed that it remains at the only official document. its highest levels since 2021, and therefore he/she considered that the labor market in that economy continues showing signs of moderation, without 1. PLACE, DATE AND PARTICIPANTS generating inflationary pressures. Regarding the outlook for world economic activity in 2026 prior to 1.1. Place: Meeting held by virtual means the onset of the conflict in the Middle East, he/she noted that since the previous meeting such outlook 1.2. Date of Governing Board meeting: March 25, was revised upwards for some economies. Another 2026. member pointed out that Purchasing Managers' Indices suggest that both manufacturing and 1.3. Participants: services sectors would show greater dynamism at • Victoria Rodríguez, Governor the global level. He/she stated that US industrial production would register higher growth in 2026. As • Galia Borja, Deputy Governor for the euro area, he/she noted that its growth would • Gabriel Cuadra, Deputy Governor be lower than that observed in 2025. Similarly, • Jonathan Heath, Deputy Governor he/she added that forecasts for the Chinese economy point to a slowdown. • Omar Mejía, Deputy Governor • Edgar Amador, Secretary of Finance and Public Most members commented that global Credit uncertainty has increased, mainly due to • María del Carmen Bonilla, Undersecretary of escalating geopolitical tensions. They Finance and Public Credit highlighted that the conflict in the Middle East could have a negative impact on global economic • María Elena Méndez, Secretary of the Governing activity. One member emphasized the potential Board weakening of aggregate demand. Some members pointed out that the effects of this conflict on global Prior to this meeting, preliminary work by Banco de economic activity will depend largely on its duration. México’s staff analyzing the economic and financial One member added that they will also depend on environment as well as the developments in inflation each economy’s exposure to energy supply from that and the determinants and outlook for inflation was region. He/she underlined that, so far, the impact has prepared and presented to the Governing Board (see been geographically limited to the vicinity of the Annex). conflict, although it is still too early to rule out its spreading to other regions. Another member noted 2. ANALYSIS AND RATIONALE BEHIND THE that risks associated with changes in trade policies GOVERNING BOARD’S VOTING have persisted for slightly over a year, which has contributed to a highly uncertain environment. International environment Most members mentioned that international benchmark oil prices rose due to the conflict in Some members indicated that world economic the Middle East. They specified that the trade activity is expected to grow in the first quarter of 2026 route of nearly 20% of the global volume of oil at a higher rate than in the previous quarter. They supply freight has been affected. Some members highlighted the case of the United States. They highlighted that this disruption has created a volatile commented that economic activity in that country environment. One member pointed out that the Brent would be supported by non-residential investment crude oil price has exceeded 100 US dollars per amid the dynamism of certain technology sectors, as barrel, a level unseen since 2022. He/she added that well as by household spending. However, they noted futures markets point to a potential relative shortage that the latter is expected to have moderated as a of crude oil in the short term. He/she indicated that result of a weaker demand for labor and a rise in the natural gas prices exhibited a differentiated behavior unemployment rate. One member noted that labor since the beginning of the conflict, with increases of markets in some of the major advanced economies 85 and 9% in their European and US benchmarks, respectively. He/she expressed that jet fuel, term ones. He/she noted that the median inflation gasoline, and diesel prices have risen by over 50% forecasts for the end of 2026 released by the Federal during the same period. He/she added that prices of Reserve rose from 2.4 to 2.7%. He/she pointed out phosphate and nitrogen fertilizers have also been that US inflation is still expected to converge to the affected, as nearly 30% of the global supply is traded target in 2028. through that region. He/she detailed that urea futures and the prices of other fertilizers have increased by Most members highlighted that global inflation more than 30%. Some members pointed out that faces a highly uncertain outlook. They warned certain economies have considered or implemented that the Middle East conflict has introduced fiscal measures to mitigate the effects of higher additional risks to inflation. One member international benchmarks on domestic prices. They emphasized that these risks are difficult to quantify at underlined that the International Energy Agency this time. Some members pointed out that the impact agreed to release strategic oil reserves. One of the conflict on inflation will depend on its duration member noted that this would be the greatest and intensity. One member added that it will also intervention of its kind since it was created. He/she depend on the pace at which production normalizes observed that, in contrast, prices of precious and in the affected energy markets. Another member industrial metals, which trended significantly expressed that the effects on inflation are expected upwards in 2025, reverted partly due to the early to be short-lived. He/she commented that economies unwinding of leveraged positions in response to the more exposed to this type of shocks, such as the increased global uncertainty. euro area and the United Kingdom, are expected to be affected in greater magnitude. Some members Some members commented that, in most advanced indicated that the prices of key inputs across various and emerging economies, inflation continued industries could face upward pressures. One approaching their respective central banks’ targets. member stated that semiconductor prices could be However, one member mentioned that the persistent affected by the shortage of helium from the Middle services inflation has continued posing challenges. East. Another member pointed out that some He/she highlighted that in most emerging economies international organizations have indicated that, headline inflation remains within the variability looking ahead, the conflict could affect the price of interval. Another member pointed out that several certain grains, such as corn, due to the impact on economies registered rebounds in inflation due to their main inputs. One member underscored the increases in the non-core component. He/she stated importance of maintaining focus on the possible that the effects of changes in trade policies have downside effects on economic activity and the begun to materialize, although the impact of tariffs on weakening of demand. inflation has remained more contained than expected. He/she considered that signs of an Some members commented that in their recent economic slowdown have gained more relevance for monetary policy decisions most central banks have inflation. Regarding the United States, one member adopted a cautious tone that allows them to assess observed that headline inflation, as measured by the the effects of geopolitical events. Some members Consumer Price Index, decreased from 2.7% in pointed out that several central banks left their December 2025 to 2.4% in February 2026, driven by reference rates unchanged in their most recent a decline in energy prices and core inflation. He/she decisions. One member highlighted the cases of noted that in the latter case, it shifted from 2.6 to Canada, Japan, Sweden, Europe, the United 2.5% over the same period, as a result of a lower Kingdom, and the United States. He/she added that inflation of goods and services. He/she added that the Reserve Bank of Australia decided to raise its food inflation remained relatively stable. Regarding reference rate by 25 basis points for the second time the outlook for inflation, another member mentioned in a row. Another member observed that in late 2025 that in several advanced economies it is expected to and early 2026 various central banks continued their be close to their respective central banks’ targets by monetary policy normalization processes. He/she the end of 2026, although he/she warned that these specified that these processes are currently forecasts have begun to be revised upwards. One undergoing a more consolidated phase and that member indicated that in the United States the effect some central banks have indicated that their of tariff measures on prices is still expected to monetary policy stances are at appropriate levels to reverse in the second half of 2026. Another member address risks on both sides of the balance. One observed that indicators of breakeven inflation and member highlighted that the Central Bank of Brazil inflation risk implied by financial instruments for that cut its reference rate for the first time since May 2024. economy increased as of March, particularly short- Some members mentioned that markets anticipate rate hikes by some central banks, especially in the members mentioned that lower risk appetite prevails. United Kingdom, Europe, and Canada. One member Most members highlighted the widespread noted that, prior to the rise in geopolitical tensions, appreciation of the US dollar. One member these central banks were expected to lower or keep commented that precious metals and some their reference rates unchanged. Another member currencies experienced a correction, as the US dollar indicated that the rate-cutting cycle by central banks and the Swiss franc strengthened due to their in emerging economies is still foreseen to continue, demand as safe-haven assets. Some members albeit at a more gradual pace. One member observed that government bond yields in several expressed that the Central Bank of Brazil stated that economies increased. One member noted the rise in the pace of future rate cuts will depend on the short-term breakeven inflation and inflation risk. inflationary impact of the war in the Middle East. He/she added that, despite this, no significant deterioration of trading conditions in fixed-income Most members noted that the Federal Reserve markets was observed. kept the federal funds rate unchanged in its March meeting. Some members mentioned that this Economic activity in Mexico central bank highlighted the environment of high uncertainty and that the implications of events in the Most members underlined that economic activity Middle East remain unclear. One member noted that has been showing a lower dynamism. Some in its communication it sent a message of greater members pointed out that GDP figures confirmed a caution due to upward revisions in inflation. Some slowdown in 2025 compared to the previous year by members pointed out that tensions in its dual registering an annual growth rate of 0.56%. One mandate have resurfaced. One member stated that member indicated that in the fourth quarter of 2025 its statement reiterated the moderation in job economic activity showed some signs of recovery. creation, while inflation remains relatively high. He/she explained that this rebound was due to a He/she indicated that the Federal Reserve chairman favorable performance of tertiary activities and pointed out that currently the labor market is not a several industrial sectors. Another member significant source of inflationary pressures. He/she specified that growth in that quarter was 0.86%. commented that, during that conference, he However, some members noted that in January the mentioned that disinflation is expected to gradually IGAE registered a seasonally adjusted monthly make progress, particularly through a continued contraction of 0.92%. They detailed that, as a result, moderation of housing inflation, as well as a decline part of the progress observed in 2025 reversed in in that of goods and other services. He/she added January 2026, due to declines in secondary that its chairman acknowledged that short-term activities, mainly in manufacturing, and some tertiary inflation expectations have evolved as expected. activities. One member underlined that the Another member specified that the chairman of said contraction in the IGAE suggests that economic central bank stated that they are still in the process activity is expected to have returned to the levels of monetary policy normalization in light of downside observed in the third quarter of 2025. Another risks to unemployment, in a context where the effect member expressed that both mining and utilities of tariffs on inflation is fading. One member sectors halted their recovery of previous months. expressed that the chairman emphasized that in He/she added that, although construction also order to resume the rate-cutting cycle a sustained contracted at the margin, it remained at moderately progress in reducing inflation will need to be high levels. Some members noted that in January observed. Some members underlined that the the different service subsectors exhibited Federal Reserve’s projections continue anticipating a heterogeneity. One member commented that reference rate cut in 2026. One member added that primary activities also declined, although they remain another cut is also expected in 2027, which contrasts at relatively high levels. Another member with markets’ expectations, which have postponed commented on the weakening of economic activity in such date. recent years. He/she indicated that in 2023 and 2024 GDP grew 3.1 and 1.4%, respectively. He/she In the face of the Middle East conflict, all observed that the average growth rate between 2000 members indicated that international financial and 2019, excluding the atypical years of the global markets registered volatility. One member pointed financial crisis, was 2.1%. Based on this, he/she out that this was not limited to commodities. He/she stated that the economy showed resilience in 2023, noted that the increase in volatility led to tighter while in 2024 it slowed down significantly and in 2025 global financial conditions. He/she expressed that it registered moderate growth. He/she emphasized stock markets fell due to the rise in oil prices. Some that this lack of dynamism in the aggregate production of goods and services in 2025 was year, slack conditions are expected to continue associated with a weakening of domestic demand. widening over the forecast horizon. Regarding domestic demand, most members Most members commented that the balance of mentioned that private consumption continued risks to economic activity has become more increasing in 2025, albeit at a slower rate than in biased to the downside in light of the conflict in 2024. Some members commented that the growth in the Middle East. One member pointed out that a consumption observed in 2025 was driven by balance of risks remaining biased to the downside services, which rose 1.4%, and by imported goods, means that the probability of GDP falling below 1.6% which grew 3.3%. Some members noted that is greater than the probability of it growing above that consumption of domestically produced goods merely rate. He/she added the risk that the conflict's impact grew 0.1%. One member considered that on global economic activity and international trade consumption has shown resilience due to solid flows may affect the Mexican economy. Another incomes supported by high real wage increases, member noted that economic activity is also subject which stand in contrast with the sluggishness of to upside risks. In this regard, he/she highlighted a economic activity. Most members expressed that potentially successful revision of the USMCA, lesser investment registered a widespread contraction trade uncertainty, and a greater-than-expected boost in an environment of global uncertainty. One from the Soccer World Cup. member underlined that said contraction was of 6.4% in 2025. Some members highlighted that the most Some members indicated that the labor market notable decline was in the domestic machinery and continued exhibiting signs of cooling. Some equipment sector. One member pointed out that by members underlined that IMSS figures registered the end of 2025 gross fixed investment showed some limited annual growth in the number of jobs. One improvement, driven by public and private member mentioned that said growth has clearly construction. Regarding external demand, another trended downwards in recent years, in line with the member stated that it has shown resilience. He/she observed slowdown in economic activity. He/she explained that non-automotive manufacturing pointed out that in 2023 the annual variation in formal exports have benefited from the reconfiguration of employment was 3%, in 2024 it was 1%, and in 2025 global trade, the increased use of the USMCA, and it was 0.3%. Another member highlighted that in the dynamism in high-tech investment in the United 2025 this rate was the lowest in the past 20 years, States. One member warned that manufacturing except for 2008 and 2020. He/she added that, exports slowed down in early 2026 compared to the according to the National Occupation and high dynamism exhibited during most of 2025. Employment Survey (ENOE, for its acronym in Spanish), the percentage of individuals who lost their Some members highlighted that the Mexican jobs remains above that observed in early 2024, economy is expected to grow at a faster rate in 2026 while the percentage of those who resigned remains than in 2025, although it would continue showing below, which is another sign of a cooling. Some weakness. One member recalled that Banco de members noted that certain indicators of formal job México's growth forecast for 2026 is 1.6%. He/she creation exhibited signs of moderate improvement in noted that this forecast would be driven by private recent months, although this trend is not generalized consumption, which is expected to recover gradually for the market as a whole. One member pointed out throughout 2026. He/she added that investment is that this is due to a rebound in formal employment expected to remain weak, mainly during the first half within the services sector in Mexico’s central region, of the year, reflecting the uncertainty associated with while in the rest of the regions it remains sluggish. the upcoming review of the USMCA. He/she He/she warned that manufacturing continues mentioned that, if this forecast is accurate, it would contracting and construction remains stagnant. result in three consecutive years of economic growth Some members indicated that the unemployment below its historical average. rate remained at low levels. Most members underscored that the labor participation rate Most members observed that, looking ahead, continued declining. One member stated that this slack conditions are expected to prevail in the has contributed to a favorable evolution of the Mexican economy. One member recalled that the unemployment rate. Another member noted that the point estimate for the output gap has remained decline in the labor participation rate has been negative. He/she specified that, despite expectations accompanied by an increase in the labor informality of higher growth in 2026 compared with the previous rate. Meanwhile, one member expressed that the growth rates of various wage indicators have continued moderating in real terms. Another Spanish) that came into effect at the beginning of member stated that the 13% increase in the minimum the year, most members stated that their impact wage, which benefits over 40% of the workforce has been limited, one-off, and confined to the earning up to one minimum wage, could continue prices of goods directly affected by said tax. affecting services costs and demand, thereby limiting They also noted that, as expected, there is no the disinflationary effect generated by slack evidence of second-round effects on inflation. conditions. One member added that the effects have materialized in line with what the economic theory One member reflected on the current conditions of suggests and with what has been observed in Mexico’s labor market. He/she argued that, in previous episodes. Some members emphasized that general, unemployment rate figures are influenced the effects of the tax adjustments, as they are one- by certain characteristics of the labor market, such as off, will have a temporary impact on annual inflation the lack of a comprehensive unemployment and will fade after a year. Regarding the potential insurance at the national level and a high degree of effects of the tariff measures introduced in early informality. He/she stated that these factors explain 2026, most members considered that there have why the unemployment rate in Mexico is lower than been no signs of potential effects on inflation, in the United States, even though economic growth particularly on its non-food merchandise has been higher in the latter country. He/she noted component. that the number of employers registered with IMSS has also trended downwards. He/she pointed out that Most members highlighted that between the first while this could be due to progress in consolidating fortnight of January and the first fortnight of or unifying IMSS employer records, it cannot be ruled March, core inflation remained practically out that it also partly reflects the closure of unchanged, by shifting from 4.47 to 4.46%. One businesses or their shift towards informality. He/she member noted that it remained stable after having highlighted that the recent upward trend in the risen in January due to the aforementioned fiscal number of unemployed individuals who are available adjustments. Regarding the impact of said for work also suggests that the unemployment rate is adjustments, another member recalled that annual not adequately reflecting the current conditions of the core inflation will be affected upwards for the rest of labor market. He/she therefore considered that an the year due to a base effect. One member pointed indicator that provides a better reading for said out that core inflation has trended upwards almost market is the evolution of employment in the formal uninterruptedly for a year. Some members sector of the economy. highlighted that, nevertheless, the annualized seasonally adjusted monthly variations already Inflation in Mexico reflect a moderation in the most recent figures, from 6.35% in January to 3.82% in the first fortnight of All members noted that between the first March. One member added that an alternative fortnight of January and the first fortnight of measure of annual core inflation that excludes the March 2026, headline inflation rose from 3.77 to items affected by the adjustments to the IEPS has 4.63%. Most members pointed out that this was remained stable. Regarding developments within the due to an increase in non-core inflation, while core component, he/she mentioned that since the core inflation remained practically unchanged. previous decision goods inflation declined slightly, Some members highlighted that the 86-basis-point while services inflation exhibited limited changes. increase during the aforementioned period was largely due to a significant rise in the prices of only Some members noted that merchandise inflation three items in the non-core component, specifically declined between the first fortnight of January and within the fruit and vegetables segment. One the first fortnight of March. One member pointed out member recalled that the non-core component is that its annual variation fell from 4.51 to 4.43% during characterized by its volatility. Another member that same period. Another member highlighted that highlighted that headline inflation has trended the annual inflation of both food and non-food upwards almost uninterruptedly since last July. merchandise declined. However, one member He/she expressed that this trend has been driven by commented that the monthly variations in the upward tendency of the core component and by merchandise prices have deteriorated and that one- an unexpected and significant rebound in the non- third of the basket grows at annualized monthly rates core component. above 5%. Some members observed that food merchandise inflation declined in the first fortnight of Regarding the adjustments to the Special Tax on March, following the increases associated with the Production and Services (IEPS, for its acronym in IEPS registered in the first fortnights of the year. One services subcomponent remains stagnant at a level member pointed out that in February the monthly close to 4.5%. Similarly, he/she stated that, despite variation of food merchandise inflation was below its the improved evolution of prices of some services, historical average for that same month. He/she pressures persist in sectors such as education, added that, after the significant increase in the first transportation and food services. He/she warned fortnight of January, the trend observed in February that, at the margin, 60% of services items register was practically identical to what would have prevailed annualized monthly rates greater than 5%. in the absence of excise taxes on sweetened beverages and cigarettes, based on a counterfactual Most members noted that between the first estimate. He/she expressed that this suggests a fortnight of January and the first fortnight of normalization in the behavior of food merchandise March, non-core inflation rose from 1.43 to prices. Another member noted that the annualized 5.18%. They pointed out that this was due to a seasonally adjusted monthly inflation of food, sharp increase in fruit and vegetables’ prices. beverages, and tobacco stood at 3.81% in the first One member mentioned that, thereby, atypically low fortnight of March, while in January it rose above levels of non-core inflation have been left behind, 15%. In this regard, one member considered the which allowed to attain levels of headline inflation increase in this category to be temporary. Some below 4%. Another member specified that the members concluded that evidence confirms that the annual inflation of the subcomponent of fruit and increase observed in January in the goods affected vegetables rose from -2.90 to 23.91% during said by the tax measures was a one-time event. However, period. One member commented that this occurred one member warned that pressures on food after several fortnights during which its annual merchandise prices, which have intensified as a variation had been negative. All members agreed result of the tax adjustments, have not been offset by that said increase was mainly explained by a reductions in non-food merchandise prices. Another significant rise in the prices of a small number of member pointed out that, despite the aforementioned agricultural products, particularly tomatoes. tariff changes, non-food merchandise inflation stood Most of them also mentioned the rise in the price at 3.16% in the first fortnight of March, slightly below of green tomatoes, potatoes, and other root and the 3.22% registered in the first fortnight of January. tuber vegetables. One member stated that the One member highlighted that its monthly variations annual inflation of said CPI items spiked from -6.4 to in January, February, and the first fortnight of March 102.3%. Another member pointed out that these were slightly lower than those typically observed items only weigh 1.26% in the CPI. Another member during that period. He/she added that this is indicated that these pressures come in addition to consistent with the projection that the effects of the those already affecting other products, such as beef. aforementioned tariff changes, if they materialize, The majority emphasized that the rise in prices of would be limited and gradual. In this regard, he/she these agricultural products is associated with a stated that prices do not necessarily move in identical transitory supply shock. Some members asserted proportion to tariffs, as exporting firms may reduce that this type of shocks tends to dissipate as their profit margins, just as they did during the trade production conditions of the affected products tensions of 2018 and 2019. He/she pointed out that normalize. One member recalled that in mid-2025 this is particularly evident in sectors where close the US authorities imposed tariffs on Mexican tomato substitutes are available. Another member exports. He/she stated that, in response, Mexican underlined the low percentage of imports of goods farmers allocated less land to tomato farming, which subject to the new tariffs with respect to total imports. significantly affected its current supply and, consequently, its price. Another member pointed out Most members expressed that services inflation that this situation resembles the episode in 2024, registered limited changes during the period. when tomato prices rose sharply but later reversed, One member considered that services disinflation eventually registering negative annual rates. Some has been gradually making progress. Another members underlined that, in contrast to the increase member pointed out that, although its annual in fruit and vegetable prices, the annual inflation of variations show limited movements, its annualized livestock product prices evolved favorably during the monthly variation decreased to 3.31% in its most period, while energy inflation continued exhibiting recent reading. One member noted that services negative annual variations. inflation rose slightly during the period due to increases in housing and education prices, while the Most members underlined that short-term prices of other services remained practically inflation expectations were revised upwards. unchanged. Another member underlined that the One member specified that this applied to both headline and core inflation. Another member pointed He/she noted that the appreciation of the Mexican out that short-term expectations remain consistent peso does not appear to have a downward effect on with the temporary effect from the changes in relative prices, as empirical evidence suggests that the prices anticipated for 2026. He/she detailed that exchange rate pass-through is non-linear and close expectations for 2027 were lower than those of 2026. to zero. He/she specified that during the period of Most members underlined that longer-term greatest currency appreciation, merchandise inflation expectations remained relatively stable. inflation rose significantly, while core inflation One member pointed out that they continued at sensitive to exchange rate fluctuations has continued 3.64%. Another member warned that expectations trending upwards. He/she mentioned that a number for headline and core inflation remain above the of structural factors have consolidated an inflation trajectories projected by Banco de México. floor at around 4%. In this regard, he/she highlighted Regarding breakeven inflation and inflation risk, one both external shocks and domestic pressures, such member indicated that it increased in a generalized as the minimum wage, insecurity, supply chain manner, reaching levels above the 80th percentile in disruptions, supply shortages for certain products, several cases, as a reflection of a higher inflation risk and low competition. premium. Most members considered that the balance of Some members stated that headline and core risks for the foreseen trajectory of inflation within inflation forecasts were revised upwards between the the forecast horizon remains biased to the first and third quarter of 2026. One member upside. Some members pointed out that uncertainty explained that this adjustment responds mainly to a regarding said balance has increased. One member higher trajectory for non-core inflation and a more- deemed that its upward bias has risen considerably. gradual-than-anticipated decline in services inflation. Some members argued that shocks stemming from He/she added that, as a result, inflation is anticipated the conflict in the Middle East could lead to to remain outside the variability interval until the third inflationary pressures on both sides of the balance. quarter of the year. Another member underlined that One member stated that while risks have even if this upward adjustment is considered, accentuated on both sides of the balance, those to economic analysts’ inflation expectations are still the upside remain contained for the moment. above the central bank’s forecasts. Most members anticipate that, looking ahead, the weakness in The majority listed both the direct and indirect economic activity and slack conditions over the effects of the conflict in the Middle East as upside forecast horizon will exert downward pressure on risks to inflation in Mexico. They indicated that inflation. One member highlighted that since the said effects will depend on the duration and fourth quarter of 2024, when the output gap turned intensity of the conflict. They cited the rise in negative, services inflation excluding food services international energy prices as a direct effect. has decreased by about 100 basis points. Some They anticipated that its impact on inflation members added that the monetary policy stance, would be limited. All members indicated that this which remained clearly restrictive in recent years, is would be due, in part, to the price cap policy still in effect and will continue to exert downward implemented by the federal government, which pressure on prices. One member stated that this, reduces the pass-through of shocks in combined with the anchoring of long-term international fuel prices onto domestic prices. expectations, will help mitigate the impact of the One member recalled that in 2022 international oil prevailing shocks on prices. Nevertheless, another prices exceeded 100 US dollars per barrel due to the member considered that the factors that were war in Ukraine. He/she added that, on that occasion, expected to contribute to disinflation have failed to Mexican authorities lowered the IEPS tax on curb inflationary pressures and anticipated that, gasoline, which helped keep domestic prices going forward, they would not do so either. He/she relatively stable, in contrast to what happened in noted that, since a year ago, the determinants of other economies. Another member underscored inflation have not signaled that the upward trend of that the agreement to refrain from raising the price of inflation can reverse. He/she pointed out that the regular gasoline above 24 pesos per liter was weak behavior of economic activity has been most recently extended for six months. He/she added that evident in investment, while consumption has shown fiscal incentives have been set for low- and high- resilience due to wage increases. He/she octane gasoline, and the incentive for diesel has commented that, therefore, the weakness of GDP been increased. However, one member warned that, coincides with the rebound in core inflation and with although adjustments to the IEPS would mitigate the supercore inflation not showing signs of declining. immediate pass-through onto some energy prices, their role in reducing second-round pressures would Regarding the nature of the shocks stemming from be limited. He/she mentioned that energy inputs that the Middle East conflict, one member identified three are not subject to this scheme could lead to cost- potential scenarios, each with different implications related pressures. Another member expressed that for inflationary dynamics. First, he/she stated that, in the impact in Mexico from the increase in the event of a predominantly geopolitical shock, the international energy prices will not be either direct or pass-through mechanism would operate through two immediate. One member considered the possibility channels with opposite effects: the activity channel, that rising international energy prices could lead to a which would tend to weaken economic prospects and slowdown in global economic activity, particularly in exert downward pressure on aggregate demand and the United States, and eventually pose a downside prices; and the risk channel, which elevates the risk to inflation in Mexico. Some members observed premium for insuring future availability, raising the that segmentation of the global natural gas market value for having inventories or hedges, thus pushing leads to price differences across regions, implying energy prices upwards and raising costs. Second, that the impact of the Middle East conflict on inflation he/she noted that, should an oil-related shock in Mexico would be less severe than that materialize, a more prolonged disruption in energy experienced by other economies. One member supplies would be expected, with more significant argued that this segmentation is due to technological and persistent disruptions. Third, he/she mentioned factors that make price arbitrage difficult. Another that if the shock were to affect a broader set of member emphasized that the price of natural gas in commodities, the impact on inflationary dynamics North America, the region that is relevant to Mexico, could be more generalized and persistent. He/she has remained stable. explained that, in an uncertain environment, precautionary price adjustments are common, which With regard to the indirect effects of the Middle can lead to more long-lasting inflationary pressures. East conflict, most members cited the risk of However, he/she indicated that it is not yet possible rising international commodity prices and their to clearly identify which scenario might unfold. consequent impact on production costs. One Regarding other upside risks, another member member noted that the increase in international indicated the persistence of core inflation and the commodity prices would affect manufacturing prices possibility that greater cost-related pressures could worldwide, including those in Mexico. Another be passed on to consumer prices. One member member mentioned that these effects would spread stated that it is still too early to say that the effects of through price increases in petroleum-based products the adjustments to the IEPS and tariffs have been or their substitutes. He/she added, however, that contained. He/she specified that the Middle East these effects would not be passed on to consumer conflict represents a shock of greater magnitude than prices proportionally and would rather be reflected that caused by the IEPS modifications and by tariffs, gradually. Most members pointed out the risk of the effects of which could extend for several quarters. rising food prices. One member specified that their international references could be affected by higher Macrofinancial environment fertilizer prices. Another member stated that the higher costs of nitrogen fertilizers could affect Some members mentioned that, since the previous domestic production and the prices of various monetary policy decision, the Mexican peso has agricultural and livestock products for several depreciated. One member stated that it traded in a months. Some members estimated that rising global wide range. He/she noted that the implied volatility in freight costs would eventually affect inflation in short-term options rose significantly and that the Mexico. One member highlighted the issue of implied bias towards depreciation increased. He/she international freight, noting that disruptions to pointed out that in both instances the increases were strategic shipping routes and increasing marine fuel greater than those exhibited by comparable costs would raise freight costs and, consequently, currencies. Some members underscored that the prices of Mexico’s imports. Most members Mexico's stock markets registered declines. One estimated that the current ample slack conditions member indicated that Mexico’s main stock market of the Mexican economy would help mitigate the index (IPC, for its acronym in Spanish) fell due to the impact of the direct and indirect shocks reappraisal of companies exposed to energy costs. stemming from the Middle East conflict on He/she also emphasized that Mexican financial inflation in Mexico. Some members noted that, in markets exhibited an increase in volatility. Another contrast with the global context in 2022, the member noted that those markets performed in line economic slack is now greater and the Mexican with the developments in other emerging economies. economy is less dynamic. Some members pointed out that, while market conditions have deteriorated, said decline has been limited and targeted impact. He/she also noted that less severe than during previous periods of risk there have been no signs of price increases resulting aversion. from the tariff hikes on certain imports. He/she commented that, since the outbreak of the conflict in As for the fixed-income market, most members the Middle East, global energy prices have noted that interest rates on government rebounded significantly, and there is considerable securities rose across most maturities. One uncertainty as to how this crisis will unfold. However, member stated that, nevertheless, risk premia he/she explained that if the measures established by showed limited changes and remained at levels the federal government continue to be implemented, similar to those registered in the first half of 2024. both direct and indirect impacts of the external shock Another member mentioned that in recent weeks on domestic prices would be limited. He/she recalled foreign investors had been unwinding their positions that, in addition, various inflation determinants will in M-bonds amid an environment of risk aversion. continue to help ease inflationary pressures. He/she He/she added that this partially reversed the inflows highlighted the ample slack conditions, the accumulated so far this year. He/she observed that disinflationary effects of the clearly restrictive market-implied expectations for the reference rate monetary policy stance that was maintained, and the point to a pause in upcoming decisions. anchoring of longer-term inflation expectations. He/she stated that Banco de México will continue Monetary policy monitoring the evolution of the conflict. He/she indicated that, in light of negative supply shocks, The Governing Board deemed appropriate on monetary policy must prevent second-round effects this occasion to continue the rate-cutting cycle, from affecting the price formation process, including consistent with the assessment of the current the impact on longer-term inflation expectations. inflationary outlook. It took into account the He/she argued that this principle acknowledges observed levels of the exchange rate, the monetary policy’s scope of action, as it involves a weakness of economic activity, and the level of shock that, in principle, should reverse by itself. monetary restriction implemented. It also He/she estimated that the proposed rate cut helps to deemed that the monetary policy stance attained normalize the monetary policy stance so it can is adequate to face the challenges posed by an address the risks on both sides of the balance. extension and escalation of the Middle Eastern He/she considered that, going forward, the conflict and its outcome. Thus, with the presence appropriateness and timing for an additional of all its members, the Board decided by majority reference rate cut will be evaluated depending on the to lower the target for the overnight interbank evolution of macroeconomic and financial conditions, interest rate by 25 basis points to 6.75%. and that all inflation determinants will be taken into account in this regard. He/she expressed that, given Looking ahead, depending on the evolution of the prevailing uncertainty, the Governing Board will macroeconomic and financial conditions, the monitor the evolution of external conditions and will Board will evaluate the appropriateness and at all times maintain a monetary policy stance timing for an additional reference rate cut. It will consistent with the goal of ensuring the stability of the take into account the effects of all determinants peso’s purchasing power. of inflation and will monitor the evolution of external conditions. Actions will be implemented Another member mentioned that since the previous in such a way that the reference rate remains monetary policy decision headline inflation has consistent at all times with the trajectory needed exceeded the upper bound of the variability interval. to enable an orderly and sustained convergence He/she mentioned that, while inflation expectations of headline inflation to the 3% target during the remain anchored, short-term expectations have forecast period. The central bank reaffirms its deteriorated and long-term expectations are at levels commitment to its primary mandate and the need that require close monitoring. He/she deemed that, to continue its efforts to consolidate an although the determinants of inflation continue environment of low and stable inflation. pointing towards convergence, the inflation outlook has become more complex. He/she stated that more One member pointed out that the monetary stance time is needed to assess the development and scope has allowed to address the adjustments in relative of the Middle East conflict. He/she considered it prices resulting from the fiscal measures necessary to ponder how monetary policy might implemented in early 2026. He/she emphasized that, respond. He/she identified three distinct shocks in consistent with what was anticipated, it has become the current context: the geopolitical shock, the oil- increasingly clear that this was a one-off event with a related shock, and a more generalized shock on relative prices of fruit and vegetables, which are commodity prices. He/she stated that, with respect to supply-related shocks that are short-lived and have the geopolitical shock, there tends to be an activity no impact on the conduct of monetary policy. channel that exerts downward pressure on prices Regarding macroeconomic conditions, he/she and a risk channel that increases them. He/she highlighted the sluggishness of economic activity. mentioned that empirical evidence on these shocks He/she indicated that the Mexican economy would suggests that, initially, the risk channel dominates remain weak in 2026 and would mark three and, subsequently, the activity channel, and consecutive years of growth below its historical therefore, given the lags with which monetary policy average. He/she emphasized that slack conditions operates, it might be appropriate to look-through would persist, which implies downward pressures on these pressures. Regarding the oil-related shock, inflation. He/she commented that, since the last he/she argued that the literature suggests that the monetary policy meeting, the international landscape magnitude of its effects depends to a large extent on has changed due to the geopolitical conflict in the each economy’s energy grid, on the flexibility of their Middle East and the adjustments in international labor markets, and, more importantly, on the energy prices. He/she estimated that in Mexico the credibility of their central banks. He/she explained pass-through of higher international gasoline prices that this is particularly relevant in economies where to domestic gasoline prices and to headline inflation the formation of expectations is characterized by would be limited, given that domestic gasoline pricing greater inertia. He/she added that, in such a case, a policies have acted as a buffer against international more cautious response to inflation readings could price volatility. He/she added that Mexico’s access to help maintain expectations anchored and reinforce the US natural gas market via pipelines places the price stability in the medium term. He/she noted that country in a relatively more favorable position a widespread shock on commodity prices could lead compared to other economies. However, he/she to more persistent inflationary pressures that also acknowledged that, among the risks to inflation, the generate signal-extraction problems in markets, risk associated with disruptions caused by leading to preemptive price adjustments, as was the geopolitical conflicts had intensified. Considering all case in 2022, thus building more long-lasting of the above, he/she decided to cut the reference rate pressures that must be addressed by monetary by 25 basis points on this occasion. He/she specified policy. He/she expressed that the Mexican economy that, despite the adjustment, the rate would remain exhibits cyclical and structural characteristics that are above its historical average. He/she believed that the relevant for assessing the potential materialization of monetary policy stance attained would be adequate any scenario, such as the implementation of fuel to address the challenges posed by an extension and subsidies, the current slack conditions, the fact that escalation of the Middle East conflict and its the country is in an exit phase from an exceptionally repercussions. Finally, he/she stated that, going restrictive monetary cycle, the effects of which are forward, the appropriateness and timing for an still being perceived via certain transmission additional rate cut would be assessed, depending on channels, and the solid macroeconomic the developments in macroeconomic and financial fundamentals. He/she estimated that maintaining the conditions. current monetary policy stance would allow to gather additional evidence to more accurately assess the Another member noted that both headline and core nature of the shock, its potential impact on the inflation maintain an upward trend. He/she pointed Mexican economy, and the country’s price dynamics, out that in the case of core inflation it is relevant, with the aim of fulfilling the constitutional mandate. given that this component is key for the medium-term trajectory of inflation. He/she stated that the recent One member reiterated that the 2026 monetary rebound in the non-core component, which does not policy program stated that, provided the adjustment yet take into account the potential effects of the in relative prices proceeded without any second- Middle East conflict, pushes inflation away from the round effects and if macroeconomic conditions target. He/she stated that monetary policy has not warranted it, the cutting cycle in the reference rate exerted sufficient downward pressure on prices. would continue. He/she emphasized that there were He/she added that this stance has not had the no second-round effects resulting from the excise tax expected impact on financial conditions, as credit increases implemented at the beginning of the year. continues growing at high rates in segments such as He/she added that tariffs have not affected inflation, consumption and business loans. He/she noted that consistent with the forecast of a moderate and this suggests that monetary policy transmission has gradual impact. He/she noted that the recent rise in been weak and will not be sufficient to reverse the annual headline inflation was due to the shocks in current inflation trajectory. He/she emphasized that the previous high level of monetary restriction will disruptions, despite the climate of trade and gradually be left behind and, in turn, the effects of a geopolitical uncertainty. He/she indicated that, in more accommodative stance will unfold. He/she addition, slack conditions in the Mexican economy pointed out that since a year ago the inflation are expected to continue widening and that the labor determinants have not generated a significant market will remain sluggish. He/she stated that, for downward impact and, looking ahead, they will likely this reason, the impact of the Middle East conflict not revert the upward inflation trend. He/she could be more limited than that in 2022. He/she considered that the lack of disinflation is largely pointed out that Mexico’s policy of mitigating gasoline attributed to structural factors. He/she noted that, price increases, in a context of fiscal consolidation in given the increased volatility in markets, the relative the country, constitute a factor to reduce inflationary stance no longer appears as loose. He/she noted pressures on two fronts. He/she added that, despite that market volatility has increased, that the US dollar the recent volatility, the Mexican peso maintains has strengthened, and that expectations for more appreciated levels than those observed at the monetary accommodation in the United States have beginning of the year. He/she observed that the changed due to the more cautious signaling from the referred conflict is taking place at a time when the Federal Reserve, and therefore the margin for restrictive policy stance implemented over the past reducing the interest rate differential has decreased. three years will continue to favor the price formation He/she noted that the conflict in the Middle East not process. He/she expressed that monetary policy’s only tilts the balance of risks to inflation upwards but effects can be amplified depending on the phase of also increases uncertainty regarding the inflation the economic cycle, and therefore failing to adjust the outlook. He/she estimated that it is therefore policy stance would contribute to further widen slack imperative to adopt a cautious and patient approach conditions in the economy, and that it will occur once until there are compelling signs that convergence to the shock has dissipated. He/she noted that the the inflation target will be attained. He/she argued target rate is above its historical references for similar that a pause in the current policy stance is needed at levels of inflation. He/she commented that the least during the first half of 2026, in order to assess proposed adjustment allows the monetary stance to whether the existing inflationary shocks have been be in a better position to address the risks on the absorbed. He/she stated that communication with the horizon and closer to completing the monetary policy public should emphasize that patience is required normalization process. He/she believed that, going during the monetary policy normalization process forward, there is room for a further adjustment in line until there is clear and sustained evidence of with the country’s macroeconomic environment. convergence to the target. 3. MONETARY POLICY DECISION One member argued that monetary policy should avoid reacting hastily to episodes of volatility, The Governing Board deemed appropriate on this particularly in an environment where inflation has occasion to continue the rate-cutting cycle, been largely driven by adjustments in relative prices. consistent with the assessment of the current He/she stated that the prevision that the impact of the inflationary outlook. It took into account the observed IEPS increase on the prices of some food levels of the exchange rate, the weakness of merchandise would have a one-time effect has been economic activity, and the level of monetary confirmed. He/she added that no second-round restriction implemented. It also deemed that the effects have been observed either. He/she also monetary policy stance attained is adequate to face noted that, so far, there are no signs of the effects of the challenges posed by an extension and escalation tariffs on prices. He/she indicated that the recent rise of the Middle Eastern conflict and its outcome. Thus, in headline inflation is almost entirely attributed to with the presence of all its members, the Board developments in the prices of three fruit and decided by majority to lower the target for the vegetables items, categories on which monetary overnight interbank interest rate by 25 basis points to policy has no influence. He/she deemed that for this 6.75%. reason it is important to refrain from overestimating such readings. He/she asserted that the impact of the Looking ahead, depending on the evolution of Middle East conflict will depend on how disruptions macroeconomic and financial conditions, the Board in energy markets unfold. He/she argued that the will evaluate the appropriateness and timing for an current event contrasts with the one observed in additional reference rate cut. It will take into account 2022. He/she specified that currently the disinflation the effects of all determinants of inflation and will process has made considerable progress and that monitor the evolution of external conditions. Actions supply chains have not experienced significant will be implemented in such a way that the reference rate remains consistent at all times with the trajectory as well as the specific shocks attributed to the high needed to enable an orderly and sustained uncertainty worldwide. For this reason, I consider convergence of headline inflation to the 3% target that the current level of the reference rate is during the forecast period. The central bank reaffirms adequate to more accurately evaluate the evolution its commitment to its primary mandate and the need of the inflation outlook and the current shock and, to continue its efforts to consolidate an environment thereby, contribute to maintain inflation expectations of low and stable inflation. firmly anchored. 4. VOTING Dissenting opinion on the monetary policy statement. Jonathan Heath Voting in favor of the decision were Victoria Rodríguez, Gabriel Cuadra, and Omar Mejía. Galia The conventional determinants of inflation that last Borja and Jonathan Heath voted in favor of year supported the expectation of a downward trend maintaining the target for the overnight interbank were insufficient to prevent the persistence of core interest rate at 7.00%. inflation. Currently, these factors are weak. The negative output gap will narrow further in an 5. DISSENTING OPINIONS/ VOTES economy that is recovering, while at the same time the lagged effect of a restrictive monetary policy Vote. Galia Borja dissipates. The balance of risks for inflation has tilted far more to the upside. First, due to an increased In Mexico, inflation is undergoing an adjustment in uncertainty regarding inflation as a result of the new relative prices that has exerted pressure on its recent military conflict. Second, due to an unanticipated readings. In addition, the escalation of the Middle shock on agricultural prices that should dissipate East conflict has raised oil prices and volatility in over the next months. Since we are facing greater financial markets, introducing new risks for inflation risks, we have nothing to lose by making a pause and economic activity. In my opinion, there is still until these shocks truly dissipate. In contrast, we lose limited information to accurately assess the substantially by lowering the target rate at a moment implications of this shock as well as its magnitude when core inflation persists and non-core inflation and duration. The monetary policy stance has increases. With these actions we are giving the already been adjusted significantly in line with the wrong impression of being less committed to the inflationary outlook prior to this event. Since primary mandate. We revised our inflation forecasts November 2025, the ex-ante real interest rate has upward once more, but they are still far below market been within the range deemed as neutral and is very expectations. These expectations do not suggest close to the central estimate. Although some that the target will be attained in 2027, and such transmission channels continue displaying restrictive target is further compromised by lowering the conditions, they partly reflect the lags associated with reference rate. the previous extended cycle of monetary tightening, ANNEX Chart 1 Purchasing Managers' Index: production The information in this Annex was prepared for this component for advanced, emerging and global meeting by the staff of Banco de México’s economies Directorate General of Economic Research and Diffusion index, s. a.1/ Directorate General of Central Bank Operations. It 62 February does not necessarily reflect the considerations of the 60 members of the Governing Board as to the monetary 58 policy decision. 56 A.1. External conditions 52 A.1.1. World economic activity 48 Manufacturing advanced 46 Services advanced Global economic activity is expected to have grown 44 Manufacturing emerging Services emerging in the first quarter of 2026 at a higher rate than in the 42 Manufacturing global Services global previous one. This performance is estimated to have 40 J A J O J A J O J A J O J A J O J A J O J reflected a rebound in the pace of growth of 2021 2022 2023 2024 2025 2026 advanced economies, while the group of emerging s. a. / Seasonally adjusted figures. economies is estimated to have moderated. The 1/ The index varies between 0 and 100 points. A reading above 50 points latest Purchasing Managers' Indices suggest that indicates an expansion and below 50 suggests a contraction. A reading equal to 50 points indicates no change. both the manufacturing and services sectors are Source: S&P Global. expected to show higher growth globally (Chart 1). US industrial production grew at a seasonally Since Mexico’s last monetary policy decision, adjusted monthly rate of 0.2% in February, after uncertainty in the international environment has having increased 0.7% in January. This performance increased. Towards the end of February and the reflected a growth of 0.2% in the manufacturing beginning of March, geopolitical tensions in the sector and of 0.8% in the mining sector, which was Middle East escalated, leading to a significant partially offset by a contraction of 0.6% in the /repricing in energy markets. This has implied electricity and gas generation sector. Purchasing macroeconomic risks to global growth and inflation. Managers' Indices suggest that manufacturing The impact of the Middle East conflict on the world output is estimated to have continued expanding in economy is uncertain and will depend on its duration March. and intensity. The impact on individual countries will depend largely on each country’s exposure to energy supply from that region. In this context, the balance of risks to the global economy has become more pronounced to the downside. The US economy is estimated to have expanded in the first quarter of 2026 at a faster pace than in the previous quarter, when it grew at a seasonally adjusted quarterly rate of 0.2% (Chart 2).1 This performance is expected to have continued being supported by non-residential investment, given the dynamism of some technology sectors as well as by household spending, which was partly driven by the fiscal exemptions approved in 2025. In addition, the negative effects associated with the government shutdown in the fourth quarter of 2025 are estimated to have dissipated.  Note: In the electronic version of this document, the data used to generate all charts and tables can be accessed by clicking on Expressed as an annualized seasonally adjusted quarterly rate, them, except for those not produced or compiled by Banco de US GDP grew 0.7% during the fourth quarter of 2025. México. Chart 2 levels, declining from 6.2% in December 2025 to US: real GDP and components 6.1% in January 2026. Job creation, however, has Quarterly percentage rate moderated. and contribution in percentage points, s. a. 3.0 Government consumption expenditures Economic activity in the rest of the major advanced Net exports 2.5 Change in private inventories economies as a whole is estimated to have grown in Nonresidential investment 2.0 Residential investment the first quarter of 2026 at a slightly faster pace than 1.5 Private consumption expenditures in the previous quarter. Labor markets of some of Total these economies have shown signs of easing. 1.0 0.5 Altogether, the main emerging economies are 0.0 estimated to have grown during the first quarter of -0.5 2026 at a pace similar to the previous quarter. -1.0 Meanwhile, the Chinese economy is expected to -1.5 have grown similarly to the previous quarter, when it I II III IV I II III IV I II III IV I II III IV I II III IV I did so at a seasonally adjusted quarterly rate of 2021 2022 2023 2024 2025 2026 1.2%.4 During the first two months of the year, s. a. / Seasonally adjusted figures. China’s industrial production and net exports Note: The shaded area refers to the Atlanta Fed GDPNow forecasts for the first quarter of 2026, as of March 23, 2026. exhibited relatively strong growth. Retail sales grew Source: Bureau of Economic Analysis (BEA) and the Federal Reserve Bank at faster annual rates, driven in part by the stimulus of Atlanta. measures implemented by the country’s authorities to boost domestic demand, as well as by the Chinese The US labor market continued registering low job New Year festivities. Meanwhile, cumulative creation, although the unemployment rate has investment in fixed assets showed signs of recovery, remained relatively stable. In February, the non-farm particularly in the infrastructure and manufacturing payroll decreased by 92,000 jobs after having sectors. However, the Chinese economy continues increased by 126,000 in January. According to the facing significant challenges stemming from the Federal Reserve, the slowdown in job creation has weakness of its real estate sector and its domestic been associated with a fall in labor demand, as well demand, as well as from uncertainty regarding the as with a slower growth of the labor force due to potential impact of supply chain disruptions caused lower immigration and a lower labor force by the Middle East conflict on China’s economy. participation rate. In this context, the unemployment rate increased slightly from 4.3% in January to 4.4% Since Mexico’s last monetary policy decision, in February. The number of job vacancies went up different international commodity prices have from 6.6 million in December 2025 to 6.9 million in increased. Oil prices rose significantly in March January 2026. Initial claims for unemployment compared to early February due to concerns about insurance have fluctuated around the levels the crude oil supply following the escalation of the observed in 2025. During the week ending March 14, conflict in the Middle East. This was despite the there were 205,000 new claims. In February, the announcements, on the one hand, by the annual growth rate of average wages remained Organization of the Petroleum Exporting Countries unchanged at 3.7% compared to the previous and its allies (OPEC+) regarding an increase in its month.2 production starting in April and, on the other hand, by the member states of the International Energy Economic activity in the euro area is anticipated to Agency to make strategic oil reserves available to grow during the first quarter of 2026 at a slightly the market. Oil prices exhibited a limited reaction to faster pace than in the previous quarter, when it these measures because the Strait of Hormuz, a increased at a seasonally adjusted quarterly rate of major shipping route for energy products and various 0.2%.3 Available indicators suggest that the commodities, remained largely closed due to the manufacturing and services sectors have continued conflict in said region. to expand. As for the labor market, the unemployment rate remained at historically low Gas prices varied across different regions. In Europe Average hourly wages for production and non-supervisory 4 Expressed as an annual rate, China’s GDP growth was 4.5% in employees. the fourth quarter of 2025. Expressed as an annualized seasonally adjusted quarterly rate, GDP growth in the euro area was 0.8% in the fourth quarter of 2025. and Asia, prices rose sharply starting in late however, faces a more uncertain outlook given the February due to disruptions in gas shipments from recent escalation of the conflict in the Middle East, the Middle East, as well as to production cuts and which could lead to higher prices for commodities attacks on infrastructure in that region. Meanwhile, in and inputs due to disruptions in supply chains. The the United States, gas prices fell compared to early impact on inflation is expected to vary by region, February due to improved weather conditions in said depending on each region’s level of exposure to country. This came after prices reached historic these factors. highs towards the end of January amid concerns about potential supply disruptions in that country due In the United States, annual headline inflation to a winter storm. measured by the Consumer Price Index (CPI) decreased from 2.7% in December 2025 to 2.4% in Grain prices rose compared to early February. This February 2026. This was due to lower energy and performance partly reflected increased uncertainty core inflation, while food inflation remained relatively regarding supply, as rising energy and fertilizer costs stable. Specifically, core inflation declined slightly resulting from the conflict in the Middle East could from 2.6% in December to 2.5% in February. The limit agricultural production. Similarly, on the decline was the result of lower inflation of both goods demand side, grain prices fluctuated associated with and services. As for the Personal Consumption expectations of increased demand for biofuels and Expenditures (PCE) price index, headline inflation to delays in trade negotiations between China and declined from 2.9% in December to 2.8% in January. the United States, which could lead to a reduction in This reflected a reduction in both food and energy China’s purchases of US grains. inflation, which was partially offset by a rise in core inflation. Inflation of this component shifted from 3.0 Industrial metal prices closed at levels similar to to 3.1% during the same period. This was due to a those observed in early February, despite the high rise in service inflation, while goods inflation declined volatility during the period. In February, prices slightly after having increased over the previous increased amid expectations of higher demand and months. supply pressures. Subsequently, in March, this trend reversed due to a shift in demand expectations Chart 3 stemming from increased risks to global economic Selected advanced economies: activity following the escalation of the Middle East headline inflation conflict. In the specific case of aluminum, its price Annual percentage change rose due to supply disruptions from that region, 11.1 United States PCE 1/ 10.6 United States CPI 2/ which is one of the leading producers of said metal. 9.1 Euro area Meanwhile, precious metal prices generally were 6 8.1 Japan 3/ below the levels observed in early February, United Kingdom Canada although they did fluctuate. After trending upwards in 4 February and early March, said trend in prices reversed amid expectations that interest rates remain high for longer than anticipated, as the escalation of the Middle East conflict has led to new February 0 January inflationary risks. A.1.2. Monetary policy and international financial -2 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan markets 2020 2021 2022 2023 2024 2025 2026 1/ The personal consumption expenditure deflator (PCE) is used. In the main advanced economies, headline and core 2/ The consumer price index (CPI) is used. 3/ Excludes fresh food. inflation have decreased compared to the levels Note: The series includes data up to February 2026, except in the United observed at the end of 2025. While in some cases it States (PCE), whose latest available data correspond to January 2026. The chart’s range was adjusted to facilitate its reading. Figures in the chart remains above the 2% inflation targets, in others it denote the respective maximum levels of each series. The CPI data for has been close to or even below that level (Chart 3). October 2025 was not released due to the US federal government The decline in inflation reflected lower inflation in shutdown. Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Eurostat, energy, food, and, in some cases, the core Bank of Japan, the UK Office for National Statistics, and Statistics Canada. component. The evolution of the latter was due to a decline in goods inflation in some economies, while In the euro area, annual headline inflation continued that of services registered mixed and, in general, fluctuating at levels close to its central bank’s limited fluctuations across countries. Inflation, inflation target in recent months, decreasing from 2.0% in December 2025 to 1.9% in February 2026. stemming from the evolution of trade and geopolitical This decline reflected increased energy deflation, tensions. They also noted that they will remain which was partially offset by a rise in core inflation, vigilant to the evolution of risks and are prepared to while food inflation remained relatively stable during adjust their monetary policy stances if necessary. the same period. Specifically, core inflation increased from 2.3% in December 2025 to 2.4% in The US Federal Reserve left the target range for the February 2026. federal funds rate unchanged for the second consecutive decision at its March meeting. Thus, the The latest inflation forecasts for several major target range remained between 3.50 and 3.75%. The advanced economies prepared by analysts have Federal Open Market Committee (FOMC) reported been revised upwards and project an increase in in its statement that available indicators suggest that inflation in the upcoming months amid the recent economic activity has been expanding at a solid escalation of the conflict in the Middle East. Despite pace, that job creation has remained low, and that the above, said analysts anticipate that, by the end the unemployment rate has changed little in recent of 2026, in several of these economies inflation will months, while inflation remains somewhat elevated. be close to their central banks’ targets, although in It reiterated that uncertainty regarding the country’s the case of the United States they continue economic outlook remains high and added that the expecting inflation to remain above the Federal implications of events in the Middle East are Reserve’s target. Indicators of breakeven inflation uncertain for the US economy. It reiterated that it will and inflation risk drawn from financial instruments remain vigilant to risks to both aspects of its dual have increased since March, particularly in the short mandate. It also mentioned that it will carefully term, although the magnitude of the increase has assess incoming data, the evolving economic varied by country. outlook, and the balance of risks when considering the magnitude and timing of further adjustments to In emerging economies, while both headline and the target range for the federal funds rate. core inflation have performed heterogeneously across regions, a gradual progress of convergence At a press conference following the March decision, towards inflation targets has been observed in the Federal Reserve chairman reiterated that several economies. In Latin America, inflation trends Committee members consider the current monetary have varied across countries, while in emerging policy stance to be appropriate for promoting Europe, inflation has generally declined, and in progress towards both maximum employment and emerging Asia, it has risen in several countries. In the 2% inflation target. He noted that, for now, it is China, although both headline and core inflation rose important to maintain a slightly restrictive monetary recently, they remained below the central bank’s 2% policy, as they must balance their two mandates in a target. In particular, headline inflation shifted from situation where risks to the labor market are to the 0.2% in January to 1.3% in February, driven by lower downside, which would call for a lower rate, and risks fuel deflation and higher food inflation, as well as by to inflation are to the upside, which would call for a higher core inflation. The latter rose from 0.8 to 1.8% higher rate or, rather, no rate cut. He noted that the during the same comparison period, partly reflecting policy rate is currently at the threshold between increased consumer spending during the Lunar New being restrictive and non-restrictive, and that they Year festivities, which lasted longer than usual. consider this level to be adequate. He stated that the vast majority of Committee members do not In this context, since Mexico’s last monetary policy anticipate an interest rate hike as their baseline decision, several central banks in advanced and scenario, although no option is ruled out. Regarding emerging economies have kept their reference rates the Committee’s macroeconomic projections, unchanged, some after having cut them in their between December 2025 and March 2026, the previous decisions. Others continued their easing median for headline inflation, measured by the cycles. In addition, some central banks in the major personal consumption expenditure deflator rose advanced economies continued to gradually reduce from 2.4 to 2.7% for the end of 2026 and from 2.1 to their balance sheets. As for future actions, the 2.2% for the end of 2027, while it remained at 2.0% central banks reiterated that reference rate for the end of 2028. The median for core inflation was adjustments will remain dependent on incoming also revised upwards from 2.5 to 2.7% for 2026 and economic data and their implications for the inflation from 2.1 to 2.2% for 2027, while it remained at 2.0% outlook. Several central banks continued to for 2028. Meanwhile, the median GDP growth underscore that uncertainty persists regarding the projections were revised upwards for all years from economic environment and inflationary dynamics 2026 to 2028. The median for the unemployment rate remained at 4.4% for the end of 2026, rose from in most major advanced economies. Thus, several of 4.2 to 4.3% for the end of 2027, and remained at these economies are anticipated to register 4.2% for the end of 2028. The median for the federal increases in their reference rates (Chart 4). All of the funds rate remained unchanged at 3.4% for the end above, in the context of the escalating conflict in the of 2026. No member anticipated an interest rate hike Middle East and its effects on commodity prices. In for 2026. The median projection for the federal funds the case of the United States, the forecast for the rate for the end of both 2027 and 2028 continued at federal funds rate for the end of 2026 rose from 3.0 3.1%. This implies that the projection for a 25-bps cut to 3.7% in its most recent reading, a level slightly to the federal funds rate during 2026 and another cut higher than the midpoint of the current range, which in 2027 remains unchanged. The median long-term is between 3.50 and 3.75%. Similarly, the expected projection for the federal funds rate increased from rate for the euro area rose from 1.9 to 2.6%, from 2.3 3.0 to 3.1%. to 2.9% for Canada, and from 3.3 to 4.3% for the United Kingdom. Meanwhile, the forecast for Japan’s The European Central Bank (ECB) kept its key reference rate declined slightly from 1.3 to 1.2%. interest rates unchanged in its March decision. Its key deposit, refinancing, and lending rates remained Chart 4 at 2.00, 2.15, and 2.40%, respectively. The Reference rates and trajectories Governing Council commented that the conflict in the implied in OIS curves1/ Middle East has made the outlook significantly more Percent uncertain, creating upside risks to inflation and 7 ― US Federal Reserve 2/ End of End of downside risks to economic growth. They added that ― Bank of England 2026 2027 6 ― Bank of Japan it will have a material impact on near-term inflation ― European Central Bank deposit rate ― OIS implicit trajectory through higher energy prices, but that its 5 Mar 25, 2026 --- OIS implicit trajectory medium-term implications will depend both on the 4 Feb 5, 2026 intensity and duration of the conflict and on how energy prices affect consumer prices and the economy. However, they stated that they are well 2 positioned to navigate this uncertainty. In this regard, 1 said institution’s staff revised their inflation forecasts Forecasts upwards from December’s projections, especially for 0 2026. Additionally, they published forecasts for -1 alternative scenarios, depending on the evolution of 2020 2021 2022 2023 2024 2025 2026 2027 1/ OIS: Fixed-for-floating interest rate swap where the floating interest rate the conflict in the Middle East. The Council reiterated is associated with the effective overnight reference rate. that it would maintain a data-dependent approach to 2/ For the observed reference rate of the United States, the average interest rate of the target range for the federal funds rate is used. determine the appropriate monetary policy stance. It Source: Bloomberg. reaffirmed that it is not pre-committed to a particular rate path. It also reiterated that the size of its asset In the main emerging economies, a large number of purchase program (APP) and pandemic emergency central banks refrained from adjusting their purchase program (PEPP) is decreasing at a reference rates in their most recent monetary policy moderate and predictable pace. At the press decisions. Others continued with their rate-cutting conference following the March decision, the cycles. Brazil’s central bank cut its reference rate by president of that central bank stated that they are 25 basis points in its March decision, after keeping it well positioned to face a large-scale shock such as unchanged since June 2025. In the case of China’s the one currently unfolding. central bank, it has not made any adjustments since May 2025 and, as a result, the one- and five-year Regarding other advanced economies, during the loan prime rates (LPR) have remained unchanged. reporting period, the central banks of Japan, the However, it has used various tools to provide liquidity United Kingdom, Canada, New Zealand, South to the financial market. The central bank's governor Korea, Sweden, and Switzerland kept their interest has also reiterated that a moderately loose monetary rates unchanged. The Reserve Bank of Australia policy will continue to be implemented throughout was the exception, as it implemented a second 2026. 25-basis-point increase in its March decision. International financial markets displayed a different Since Mexico’s past monetary policy decision, behavior between periods before and after the monetary policy rate expectations for the end of 2026 escalation of the conflict in the Middle East in early implied by financial instruments recorded increases March. In February, financial conditions eased and stock markets showed moderate volatility, although Chart 5 some volatility indices began to rise even before the Financial conditions index1/ war began, especially those related to the crude oil Units market. As of March, global financial conditions 103 tightened and volatility in international financial markets increased. This increase was particularly 102 noticeable in energy and bond futures markets (Chart 5). The uncertainty surrounding the duration 101 and magnitude of the war has been a major factor in financial markets' response. The fixed-income market also behaved differently Tightening before and after the escalation of the conflict in the 98 Easing Middle East. Following a widespread decline in February, at the end of the period, long-term 97 Jan Jun Jan Jun Jan Jun Jan Jun Jan (10-year) and medium-term (2-year) rates in 2022 2023 2024 2025 2026 advanced economies remained above the levels Financial Conditions Index - global observed at Mexico's last monetary policy decision Financial Conditions Index - United States (Chart 6). In emerging economies, long- and Financial Conditions Index - euro area 2/ 1/ The financial conditions index is constructed considering the effect of five medium-term interest rates rose during the period variables on economic activity: the reference interest rate, the 10-year (Chart 7). The slope of the US yield curve (defined government bond, the spread of investment grade bonds over the as the spread between 10-year and 2-year government debt bond with equivalent maturity, the ratio of a stock index with 10-year average earnings per share, and the trade weighted exchange government bond yields) declined, although it rate. remained positive. Stock markets in major advanced 2/ In the case of the euro area, the spread between the sovereign bonds of France, Italy, Spain, the Netherlands, Belgium, Austria, Portugal and economies have fluctuated markedly due to the Finland over the German 10-year bond is also considered. The vertical uncertainty related to the conflict in the Middle East, black line indicates the last calendarized monetary policy meeting of Banco de México. falling overall during the period. Risk appetite also Source: Bloomberg and Goldman Sachs. declined since Mexico's last monetary policy decision. Chart 6 Change in selected financial indicators from Regarding foreign exchange markets, the US dollar February 5 to March 25, 2026 appreciated against the currencies of major 10% 100 2-year 10-year advanced economies. Lastly, capital flows to 9% <-- Stock markets <-- Currencies government government 90 bond yields --> emerging economies have increased since Mexico’s 8% bond yields --> 80 7% United Kingdom 70 Italy last monetary policy decision. Capital flows into 6% France Spain 5% Italy 50 fixed-income and equity assets registered net 4% Germany United States United Kingdom Basis points inflows during the period. Canada Spain Percentage 3% 30 France 2% DXY 1/ United States 20 CNY Germany 1% Canada 10 AUD Japan Japan 0% 0 Nikkei (Japan) CAD -1% GBP -10 FTSE-100 (UK) MXN -2% CSI 300 (China) -20 JPY -3% Nasdaq (U.S.) CHF -30 S&P 500 (U.S.) EUR -4% IBEX (Spain) NZD -40 -5% FTSE MIB (Italy) -50 Eurostoxx (Europe) -6% CAC 40 (France) -60 -7% DAX (Germany) -70 1/ DXY: a weighted average estimated by the Intercontinental Exchange (ICE) of the nominal exchange rate of the main six currencies operated globally with the following weights: EUR: 57.6%, JPY: 13.6%, GBP: 11.9%, CAD: 9.1%, SEK: 4.2%, and CHF: 3.6%. Source: Bloomberg. Chart 7 Chart 8 Selected emerging economies: financial assets Mexican markets’ performance performance from February 4 to March 25, 2026 Percent, MXN/USD and index Percent,basis Percent, basis points points 10.0 4.9 18.2 Increase 72,000 Depreciation 2-year 10-year Increase Equity Increase Region Country Currencies interest interest CDS 4.7 71,000 markets 18.0 rates rates 9.5 70,000 Mexico -2.51% -0.79% 39 13 10 4.5 17.8 Brazil 0.35% 2.05% 107 48 6 69,000 9.0 Latin 4.3 Chile -6.54% -8.89% 19 42 14 68,000 America 17.6 Colombia -0.83% -4.51% 131 36 17 4.1 67,000 8.5 Peru -2.78% -4.88% 14 99 15 17.4 66,000 3.9 Appreciacation Russia -5.96% 2.30% 129 -55 N.A. 8.0 65,000 17.2 Decrease Decrease Decrease Poland -3.49% -5.01% 92 62 6 3.7 64,000 Emerging Turkey -1.95% -6.68% 630 352 65 7.5 3.5 17.0 Europe 63,000 10Y 30Y 3Y Mexican peso 10Y 3Y 5Y Mexbol Czechia -2.58% -9.52% 76 37 6 Hungary -4.09% -6.81% 121 91 13 M-bond Inflation-indexed bonds China 0.59% -4.15% -7 1 5 Range in the Range since previous monetary policy decision Feb 4, 2026 Mar 25, 2026 Malaysia -0.80% -1.50% 13 3 9 year India -3.91% -10.19% 47 18 24 Source: Proveedor Integral de Precios (PIP), Banco de México (FIX), and Asia Philippines -1.93% -5.16% 81 115 28 Bloomberg. Thailand -3.19% 8.27% 23 27 19 Indonesia -0.80% -10.37% 121 61 18 Africa South Africa -5.61% -5.38% 60 107 46 Chart 9 Note: An upward adjustment indicates currency appreciation. Interest rates correspond to swap rates at the specified terms, except for Hungary, where Mexican peso exchange rate government securities with 3-year maturities were used as a reference. For MXN/USD the Philippines, the 2-year swap rate was used, and for Russia the swap rates for both terms were used. The latest CDS data for Russia is as of 21 June 1, 2022. Source: Bloomberg. A.2. Current situation of the Mexican economy A.2.1. Mexican markets Since Mexico’s latest monetary policy decision, the 17 Mexican peso Mexican peso depreciated moderately against the 100-day moving average US dollar, while interest rates rose across 50-day moving average medium- and long-term maturities (Chart 8). The J M M J S N J M M J S N J M 2024 2025 2026 stock market closed with losses; the sector of Source: Banco de México (FIX). materials was particularly affected due to the behavior of commodity prices. Government bond yields rose by between 10 and 50 The Mexican peso traded in a range of basis points in the medium- and long-term segments 99 cents—between 17.09 and 18.08 pesos per (Chart 10). The yield curve for real-rate instruments dollar—since the last monetary policy decision also increased, but to a lesser extent. In this context, (Chart 9). The 2.51% depreciation during the period breakeven inflation and inflation risk implicit in was driven by a significant aversion to risk in global spreads between nominal and real market rates of markets, which led to a period of US dollar strength. market instruments rose across all maturities (Chart Although the period was characterized by increased 11). volatility, trading conditions for the Mexican peso remained orderly. Chart 10 Chart 12 Nominal yield curve of government securities Interbank funding rate implied in F-TIIE swaps Percent, basis points Percent 10.5 50 11.5 10.0 40 11.0 10.5 9.5 30 10.0 9.0 20 9.5 8.5 10 9.0 8.0 0 8.5 7.5 -10 8.0 7.0 -20 7.5 Banxico overnight rate (reference rate) 7.0 6.5 -30 Implied interest rate in TIIE swaps for 03/25/26 6.5 Implied interest rate in TIIE swaps for 02/04/26 6.0 -40 12m 10Y 20Y 30Y 1m 3m 6m 3Y 5Y 6.0 March 25, 2026 J A J O J A J O J A J O D February 4, 2026 Change (February 4, 2026 to March 25, 2026) 2024 2025 2026 Trading range over the period Note: Shaded areas represent the range since the last monetary policy Source: Proveedor Integral de Precios (PIP). decision. Source: Proveedor Integral de Precios (PIP). Chart 11 Breakeven inflation and inflation risk implied in A.2.2. Economic activity in Mexico government securities’ yields Basis points During the fourth quarter of 2025, the Mexican 650 3-year 10-year economy improved from the weakness of previous 20-year 30-year quarters, by expanding at a seasonally adjusted 600 3-year average 10-year average 20-year average 30-year average quarterly rate of 0.86% (Chart 13). However, in early 550 2026, economic activity once again showed signs of significantly weakening. In this context, the 500 estimated output gap remained negative in early 2026 (Chart 14). 400 In terms of domestic demand, private consumption continued trending upwards during the fourth quarter 350 of 2025 (Chart 15). Regarding its components, in December 2025, consumption of imported goods J F M A J J A S O D J F A M J J A O N J F M more than offset the decline observed in November, 2024 2025 2026 while consumption of domestically produced goods Note: Horizontal lines refer to the respective averages observed from September 2008 to date. and services continued trending upwards Source: Proveedor Integral de Precios (PIP). moderately. In the last quarter of 2025, gross fixed investment registered some improvement from the Regarding expectations for the path of the reference weak performance of previous quarters. This was rate, information implicit in the interest rate swap due to increased spending on construction, since curve has been volatile. The latest figure investment in machinery and equipment continued incorporates a pause in the rate-cutting cycle for the trending downwards. March decision (Chart 12). Meanwhile, the survey conducted by Citi reveals a high degree of dispersion, as 14 of the 36 participants expect the next 25-basis-point cut to be announced in March, while 16 analysts expect it in May. Regarding the reference rate at the end of 2026, the consensus of analysts continues estimating that it will be at a level of 6.50%. With regard to external demand, manufacturing Chart 15 exports slowed down at the beginning of 2026, after Total investment and private consumption having shown high dynamism during most of 2025. Indices 2021 = 100, s. a. 140 120 Non-automotive manufacturing exports continued Total investment trending upwards, while automotive exports Private consumption remained sluggish (Chart 16). 130 115 Chart 13 120 110 Gross Domestic Product Quarterly percentage change, s. a. 2.5 110 105 2.0 1.39 1.18 1.18 1.17 1.17 1.5 100 100 0.94 0.84 0.86 0.79 0.75 0.72 1.0 0.51 0.51 December 0.34 90 95 0.21 0.09 0.07 0.5 J A J O J A J O J A J O J A J O J A J OD 2021 2022 2023 2024 2025 0.0 s. a. / Seasonally adjusted series and trend series. The former is -0.11 -0.5 represented by a solid line and the latter by a dotted line. Source: Mexico’s System of National Accounts (SCNM, for its Spanish -1.0 acronym), INEGI. -0.88 -0.98 -1.5 Q-IV From a sectoral perspective, in January 2026 -2.0 I II III IV I II III IV I II III IV I II III IV I II III IV industrial activity reversed most of the progress 2021 2022 2023 2024 2025 observed during the last quarter of 2025 and s. a. / Seasonally adjusted figures. Source: Mexico’s System of National Accounts (SCNM, for its Spanish remained at relatively low levels (Chart 17). acronym), INEGI. Regarding its components, the weakness of manufacturing intensified (Chart 18). Meanwhile, Chart 14 both mining and utilities sectors slowed down the Output gap estimates1/ recovery observed in previous months. Although Percent of potential output, s. a. construction also contracted at the margin, it remained at relatively high levels. Tertiary activities 8 interrupted their upward trend. As for labor market indicators, the national unemployment rate in January 2026 was similar to -4 that of December 2025, while the urban -8 unemployment rate rose slightly in the same Global Economic Activity Index (IGAE) 2/ -12 comparison (Chart 19). Meanwhile, after having -16 Gross Domestic Product 2/ been stagnant in January, the number of newly 95% confidence interval 3/ created formal IMSS-insured jobs showed again -20 Q-IV January signs of improvement in February 2026. Lastly, unit -24 labor costs continued trending upwards in January. JA J O JA J O JA J O JA J O JA J O JA J O JA J O JA J O J 2018 2019 2020 2021 2022 2023 2024 2025 2026 s. a. / Calculations based on seasonally adjusted figures. 1/ Output gap estimated with a tail-corrected Hodrick-Prescott filter; see Banco de México (2009), “Inflation Report, April-June 2009”, p.69. 2/ GDP figures for the fourth quarter of 2025 and IGAE figures as of January 2026. 3/ Output gap confidence interval calculated with a method of unobserved components. Source: Prepared by Banco de México with INEGI data. Chart 16 Total manufacturing exports Indices 2021 = 100, s. a. Total 160 Automotive Non-automotive January J A J O J A J O J A J O J A J O J A J O J 2021 2022 2023 2024 2025 2026 s. a. / Seasonally adjusted series and trend series based on data in nominal US dollars. The former is represented by a solid line and the latter by a dotted line. Three-month moving average. Source: Prepared by Banco de México with data from the Tax Administration Service (SAT, for its Spanish acronym), the Ministry of Economy (SE, for its Spanish acronym), Banco de México, the National Institute of Statistics and Geography (INEGI, for its Spanish acronym). Mexico’s Merchandise Trade Balance. The National System of Statistical and Geographical Information (SNIEG, for its Spanish acronym). Information of national interest. Chart 17 Global Indicator of Economic Activity Indices 2021 = 100, s. a. 110 120 112 112 Total Primary activities Secondary Tertiary activities 115 110 activities 110 110 108 108 105 106 106 100 104 104 102 102 95 102 100 90 100 100 January January January January 98 85 98 98 202 1 202 2 202 3 202 4 202 5 202 6 202 1 202 2 202 3 202 4 202 5 202 6 202 1 202 2 202 3 202 4 202 5 202 6 202 1 202 2 202 3 202 4 202 5 202 6 s. a. / Seasonally adjusted series and trend series. The former is represented by a solid line and the latter by a dotted line. Source: Mexico’s System of National Accounts (SCNM, for its Spanish acronym), INEGI. Chart 18 Industrial activity1/ Indices 2021 = 100, s. a. 110 110 135 106 Manufacturing (63%) Mining (12%) Construction (19%) Utilities (6%) 125 102 100 120 115 98 95 110 105 94 January January January January 95 85 95 90 202 1 202 2 202 3 202 4 202 5 202 6 202 1 202 2 202 3 202 4 202 5 202 6 202 1 202 2 202 3 202 4 202 5 202 6 202 1 202 2 202 3 202 4 202 5 202 6 s. a. / Seasonally adjusted series and trend series. The former is represented by a solid line and the latter by a dotted line. 1/ Figures in parenthesis correspond to their share in the total in 2018. Source: Mexico’s System of National Accounts (SCNM, for its Spanish acronym), INEGI. Chart 19 commercial bank mortgage loans showed no National unemployment rate and significant changes during the month. Lastly, based urban unemployment rate on information available as of August 2025, bank Percent, s. a. interest rates on consumer loan portfolios declined 6.5 Urban unemployment rate across most of the segments comprising this 6.0 category. National unemployment rate 5.5 5.0 Regarding portfolio quality, delinquency rates increased slightly in January, both in the corporate 4.5 and household portfolios. Despite this, these 4.0 indicators remained at low levels compared to their 3.5 historical records. 3.0 2.5 Chart 20 2.0 January Performing credit from commercial banks J M S J M S J M S J M S J M S J to the non-financial private sector 2021 2022 2023 2024 2025 2026 Annual percentage change s. a. / Seasonally adjusted series and trend series. The former is 15 represented by a solid line and the latter by a dotted line. Source: Prepared by Banco de México with ENOE data, INEGI. 10 In January 2026, domestic financing to the private sector continued expanding, albeit at a slower pace than in the previous month. Thus, the growth rate of -5 this credit aggregate continued moderating. Within it, -10 commercial bank credit to firms registered an annual Consumption -15 Mortgage 1/ variation slightly lower than that of the previous Non-financial private firms 2/ January month (Chart 20). Meanwhile, bank lending to -20 J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J households remained on a moderate trend. 2018 2019 2020 2021 2022 2023 2024 2025 2026 Regarding its components, consumer loan portfolio 1/ Adjusted to account for the withdrawal from and the incorporation of kept growing at a faster rate than the housing non-bank financial intermediaries to the credit statistics. 2/ Adjusted for valuation effects due to movements in the exchange rate. segment. Source: Banco de México. As for financing costs, interest rates on new bank A.2.3. Development of inflation and inflation loans to businesses continued trending downwards outlook in January. This trend continued reflecting the pass-through of the reference rate to bank interest Annual headline inflation rose from 3.79 to 4.63% rates in the segment. Meanwhile, interest rates on between January and the first fortnight of March 2026. This increase was driven by higher non-core Chart 22 inflation, while core inflation declined (Chart 21 and Merchandise and services core price subindex Table 1). Annual percentage change Merchandise Chart 21 Services Consumer Price Index Annual percentage change 14 8 13 CPI 12 Core 11 Non-core 6 10 5 8 4 7 3 5 2 4 1 3 F1-March 1 J M S J M S J M S J M S J M S J M S J M S J 0 2019 2020 2021 2022 2023 2024 2025 2026 -1 Source: Banco de México and INEGI. -2 F1-March -3 J M S J M S J M S J M S J M S J M S J M S J Chart 23 2019 2020 2021 2022 2023 2024 2025 2026 Merchandise core price subindex Source: Banco de México and INEGI. Annual percentage change Annual core inflation stood at 4.52 and 4.46% in Food, beverages and tobacco 14 Other merchandises January and the first fortnight of March 2026, respectively. Within its components, merchandise 12 inflation decreased during that period from 4.56 to 4.43% (Chart 22). This reflected a decline in food merchandise inflation from 6.13 to 5.91% and in 8 non-food merchandise inflation from 3.22 to 3.16% 6 (Chart 23). Meanwhile, in the same comparison, services inflation remained relatively stable 4 registering 4.48 and 4.49%. This performance was 2 driven by an increase in housing inflation from 3.44 F1-March to 3.52%, which was practically offset by a decrease 0 J M S J M S J M S J M S J M S J M S J M S J in education inflation from 6.02 to 5.96%, and in 2019 2020 2021 2022 2023 2024 2025 2026 inflation for services other than housing and Source: Banco de México and INEGI. education from 5.27 to 5.22%. In this last category, the lower annual variation in the prices of food, Between January and the first fortnight of March entertainment, transportation, and 2026, annual non-core inflation rose from 1.39 to telecommunications services stood out. 5.18% (Chart 24 and Table 1). This result was due to a rise in inflation of agricultural and livestock products from 1.52 to 9.69%, driven in turn by a higher inflation of fruits and vegetables, which rose from 1.84 to 23.91% during that period. In this regard, the highest annual price variations were for tomatoes and green tomatoes stood out, which alone contributed with 71 basis points to the increase in headline inflation during the first fortnight of March. In contrast, inflation of livestock products decreased from 3.91 to 0.57% during the same period. Meanwhile, energy inflation went from 1.16 to 0.60%, driven by the larger annual variation in electricity and gasoline prices. Chart 24 headline inflation (5 to 8 years) rose at the margin Non-core price subindex from 3.60 to 3.64%. In contrast, those for core Annual percentage change inflation remained stable at 3.60%. Lastly, between 25 Non-core January and March, inflation expectations implied by Agricultural and livestock products 20 Energy and government-authorized prices market instruments remained relatively stable. In contrast, the monthly average of the inflation risk 15 premium increased, standing above its historical average. Headline inflation is still expected to converge to the target in the second quarter of 2027. Forecasts are 0 subject to various risks. On the upside: i) disruptions due to foreign trade policies or to an inflationary -5 impact from geopolitical conflicts; ii) cost-related -10 F1-March pressures; iii) persistence of core inflation; iv) a trend J M S J M S J M S J M S J M S J M S J M S J towards depreciation by the Mexican peso, and v) 2019 2020 2021 2022 2023 2024 2025 2026 climate-related impacts. On the downside: Source: Banco de México and INEGI. i) lower-than-anticipated economic activity in Mexico and/or the United States; ii) a lower pass-through Regarding inflation expectations drawn from the from increased costs, and iii) lower pressures survey conducted by Banco de México among stemming from the appreciation the national currency private sector specialists between January and has been registering since last year. The risks for the February 2026, the median of headline inflation for trajectory of inflation within the forecast horizon the end of 2026 increased from 3.95 to 4.00%, while remain biased to the upside. The changes in for core inflation it rose from 4.11 to 4.17%. Headline economic policy by the US administration and the inflation expectations for the end of 2027 remained escalation of geopolitical conflicts add uncertainty to stable. The median of headline inflation rose from the forecasts. Their effects could imply pressures on 3.73 to 3.75%, and for core inflation, from 3.75 to inflation on both sides of the balance. 3.74%. The median of headline inflation expectations for the next four years remained unchanged at 3.75%, while that of core inflation was adjusted from 3.75 to 3.72%. Median expectations for long-term Table 1 Consumer Price Index and components Annual percentage change 1st fortnight Item January 2026 February 2026 March 2026 CPI 3.79 4.02 4.63 Core Subyacente 4.52 4.50 4.46 Merchandise 4.56 4.55 4.43 Food, beverages and tobacco 6.13 6.20 5.91 Non-food merchandise 3.22 3.13 3.16 Services 4.48 4.45 4.49 Housing 3.44 3.44 3.52 Education (tuitions) 6.02 6.04 5.96 Other services 5.27 5.20 5.22 Non-core No Subyacente 1.39 2.44 5.18 Agricultural and livestock products 1.52 4.50 9.69 Fruits and abd vegetables -1.84 9.88 23.91 Livestock products 3.91 0.98 0.57 Energéticos Energy and government-authorized y Tarifas Aut. por Gobierno prices 1.28 0.89 1.76 Energy products -1.16 -1.77 -0.60 Government-authorized Tarifas Autorizadas por Gobierno prices 5.85 5.82 6.10 Source: INEGI. Document published on April 9, 2026