Banamex urges Banxico to exercise caution in the face of inflationary pressures for 2026
Faced with a scenario of greater inflationary pressure projected for 2026, driven by the effects of new tariffs, taxes and the increase in the minimum wage, Banamex estimates that the Bank of Mexico should maintain a cautious stance regarding the reduction of its reference interest rate. The financial institution emphasizes the need for the monetary authority to prioritize price stability in a changing fiscal context.
Inflation forecasts and the path of the interest rate
In a detailed technical analysis, the firm projects that, given the cost pressures expected for the end of 2026, annual headline inflation will be 4.3%, while core inflation – an indicator that excludes volatile prices such as energy and agriculture – will reach 4.2%. “We consider that Banxico will act prudently, pausing interest rate cuts in the first quarter of 2026,” the bank stated. This pause would allow the agency to evaluate the full impact of the fiscal measures on the economy.
By the end of 2025, the outlook is slightly more benign. Banamex anticipates lower price pressures, with agricultural products increasing at a slower rate than expected, which would offset upward adjustments in transportation rates. Regarding core inflation, a moderate increase in the price of goods is estimated, which would be offset by a slowdown in services. In this environment, the institution revised its forecast for general inflation downwards, placing it at 3.9% by the end of 2025, compared to 4% previously, and maintained its expectation for core inflation at 4.2%.
Banamex considers that the Governing Board of the Bank of Mexico will maintain the monetary relaxation cycle for the remainder of the current year. Consequently, it projects a cut of a quarter of a percentage point in the November meeting and another of the same magnitude in December, which would position the target interest rate at a level of 7.0% at the end of the year.
The inflationary impact of fiscal measures
According to the analysis of the banking institution, the inflationary rebound expected at the beginning of 2026 will force the monetary authority to act with greater circumspection, with the aim of carefully analyzing the effects generated by the rise in prices. “We anticipate that the Governing Board would choose to stop the cuts in the first quarter of the following year, and then make two final cuts in May and June 2026, culminating the cycle with a rate of 6.50%, the midpoint of the range considered neutral for the interest rate,” he explained.
Banamex recalled that the recent adjustments in inflation expectations for 2026 anticipate a significant increase, driven primarily by next year’s fiscal package. In its quest to improve the fiscal balance, the government has included a series of collection measures that, although beneficial for public finances, will generate additional inflationary pressures.
The institution quantified this impact: it is estimated that the increase in the so-called “healthy” taxes through the collection of the Special Tax on Production and Services (IEPS) on products such as cigarettes and beverages with sweeteners, added to the increases in taxes on duties and uses, will contribute approximately 19 basis points to inflation in 2026. Additionally, the increase in tariffs for Countries with which there is no trade agreement will impact inflation by around 22 basis points.
The analysis also refers to the approval of the Federal Income Law for 2026, an integral part of the Economic Package, by the Senate of the Republic on October 30. This regulation introduces substantial modifications to the Income Tax (ISR) and the Value Added Tax (VAT) that will directly affect the banking and insurance sectors. In particular, insurers will be impacted by restrictions on the crediting of VAT paid in the acquisition of goods or services for the fulfillment of insurance contracts, especially when compensation involves compensation for damages or replacement of damaged goods through third parties. Insurers are expected to pass a significant portion of this financial impact on to end consumers through premium and rate adjustments, adding another layer of pricing pressure.
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