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Banxico minutes flag upside inflation risks from Middle East conflict

Banxico minutes flag upside inflation risks from Middle East conflict

FXStreetFXStreet2026/05/21 17:13
By:FXStreet

Banco de Mexico (Banxico) released its latest meeting minutes on Thursday, in which the Middle East conflict dominated the board's discussion.

On May 7, Banxico cut rates by 25 basis points to 6.50%, while telegraphing that the easing cycle that began in 2024 is over. The decision was not unanimous, with a 3-2 vote, with Deputy Governors Galia Borja and Jonathan Heath voting to hold rates unchanged.

All the members of the board expressed that risks to inflation are tilted to the upside, due to the Middle East conflict, though they “argued that their direct impact on inflation in Mexico has been limited,” the minutes revealed.

Key highlights:

MOST BOARD MEMBERS AT BANXICO'S MAY MEETING CONSIDERED BALANCE OF RISKS FOR TRAJECTORY OF INFLATION REMAINS BIASED TO THE UPSIDE

ALL BANXICO BOARD MEMBERS HIGHLIGHTED THE UPWARD RISKS RELATED TO THE MIDDLE EAST CONFLICT

MOST BANXICO BOARD MEMBERS INDICATED THAT THE CONTRACTION OF ECONOMIC ACTIVITY WAS THE RESULT OF DECLINES ACROSS ITS THREE MAJOR SECTORS

MOST BANXICO BOARD MEMBERS MENTIONED THAT ECONOMIC ACTIVITY IN MEXICO CONTRACTED DURING THE FIRST QUARTER NOTABLY GREATER THAN ANTICIPATED

BANXICO'S BORJA: ADOPTING A CAUTIOUS APPROACH AND MAINTAINING THE CURRENT POLICY STANCE IS ADEQUATE TO HAVE MORE INFORMATION THAT ALLOWS US TO ASSESS MORE ACCURATELY THE INFLATIONARY OUTLOOK

BANXICO'S HEATH: THE NARROW MARGIN FOR FURTHER RATE CUTS AND FOR REDUCING THE DIFFERENTIAL WITH RESPECT TO EXTERNAL RATES, ALONG WITH AN ELEVATED UNCERTAINTY, JUSTIFIES PAUSE

BANXICO'S HEATH CITES SUSTAINED CORE INFLATION AS WELL AS PRICE SHOCKS, MILITARY CONFLICTS AND FISCAL ADJUSTMENTS

ONE BANXICO BOARD MEMBER SAID AS EVOLUTION OF PRICE SHOCKS IS STILL UNCERTAIN, UPSIDE RISKS TO INFLATION IN THE MEXICAN ECONOMY REMAIN CONTAINED

MOST BANXICO BOARD MEMBERS MOST MEMBERS POINTED OUT THAT SLACK CONDITIONS ARE EXPECTED TO CONTINUE WIDENING AND REDUCE INFLATIONARY PRESSURES

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