Our economic outlook for Mexico

We expect the Mexican economic outlook to improve in 2027, supported by a strong U.S. economy led by AI-related investment and productivity. Renewed tensions in the Middle East have increased volatility in energy markets and contributed to near-term uncertainty. Mexico’s exposure to the conflict is mainly indirect, operating through higher global energy costs—particularly refined petroleum products and natural gas—rather than through direct supply links to the region.

Demand from the U.S. should continue to support Mexico’s economy, particularly through export-related manufacturing. Recent data remain consistent with an uneven recovery: Capital and intermediate goods imports and business surveys point to improving momentum, but consumption continues to be subdued. Trade policy is also still a meaningful headwind. The United States-Mexico-Canada Agreement remains in force but is subject to annual reviews. The continued uncertainty is weighing on investment planning and business confidence.

Inflation has generally continued to moderate in line with our expectations. Year-over-year headline inflation inched up to 3.3% in August, while core inflation stood at 3.9%, supported by softer merchandise inflation and some improvement in services price pressures. We still expect disinflation to proceed gradually. Contained real wage growth and stable long-run expectations should help inflation further decline over time. Still, services inflation remains elevated and the balance of risks from trade disruptions, energy prices, and weather shocks remains tilted to the upside.

We expect the Bank of Mexico (Banxico) to keep its policy rate unchanged at 6.5% at its September meeting. Recent inflation and activity data reduce the need for tighter policy, but sticky services inflation, above-target inflation expectations, and risks from food prices and the external environment argue against easing. Banxico has indicated that the current policy stance remains appropriate, and we continue to expect the policy rate to remain at 6.5% through 2027.