The dollar closed Wednesday, September 16 above 17.25 pesos, its highest close in six weeks, after the Federal Reserve raised its benchmark rate by 25 basis points to a range of 3.75% to 4.0%, according to El Universal Cartera.

The Federal Reserve's decision was unanimous among the 12 voting members of the Federal Open Market Committee. In Mexico, Banco de México held its rate at 6.50% on August 6, its second consecutive pause, which narrowed the differential against the U.S. rate to a new historic low of 250 basis points, according to Bloomberg Línea. That differential sustains the appeal of positions in pesos and, with it, the cost of financing for the Mexican government and Mexican companies. The peso's retreat extended into a third consecutive session, according to El Universal Cartera's tally.

Banxico's next monetary policy meeting is scheduled for September 24. The most recent Citi Expectations Survey, cited by Bloomberg Línea, shows that 25 of 37 analysts do not expect any move in the rate, and the forecast for the end of 2026 remains at 6.50%. Mexico's headline inflation stood at 3.26% in August and core inflation reached 3.88%.

"Banxico has room to keep the interest rate at 6.50% because the peso is very strong," said Marco Oviedo, senior strategist for Latin America at XP Investments. "The exchange rate probably will depreciate, but the key word here is 'disorderly depreciation,'" said Luis Gonzali, vice president and co-director of Investments at Franklin Templeton Investments Mexico. Humberto Calzada, chief economist for Rankia Latin America, noted that "if the international environment forces rates to stay high for longer in Mexico, we could see more restrictive financial conditions."

The Federal Reserve's dot plot points to one additional rate increase before the end of 2026, according to Bloomberg Línea. With the September 24 meeting as the next date on the calendar, the market continues to watch the 250 basis point differential, which remains the peso's main anchor.

This article was written with the assistance of artificial intelligence from verified sources and reviewed by a human editor before publication.