Minutes of the most recent monetary policy decision published by Mexico's central bank show the economy contracted in the first quarter at a pace that, according to the majority of the five-member board, was deeper than expected and that any subsequent recovery will probably be gradual.
The minutes indicate broad-based weakness in the first three months of the year. Board members noted industrial activity was sluggish, manufacturing weakened further and the services sector interrupted a prior upward trend. Private consumption also lost strength in the first two months of 2026, according to the record.
Exports were highlighted as the principal source of economic growth. The bank said shipments to foreign markets have shown notable resilience even as global uncertainty has increased, leaving external demand as the main driver supporting activity.
Several board members observed that much of the growth recorded in the fourth quarter of the previous year appears to have been reversed, given that the economy registered a 0.8% contraction in the first quarter. One member emphasized that manufacturing activity has fallen on an annual basis for nine consecutive months, attributing much of that weakness to reduced dynamism in the auto industry. Another member reported that a two-quarter improvement seen in mining and power has been halted.
The services sector's gains have been eroded by soft performance in specific components, the minutes say. Hotels and food preparation services, along with wholesale trade, were singled out as areas weighing on overall services output.
On policy, the board announced that the monetary easing cycle initiated in 2024 is over. The bank's forward guidance stated that "it will be appropriate to maintain the reference rate at its current level." In the minutes, recent inflationary pressures in certain farm products such as tomatoes were described as temporary. Banxico's projection remains for inflation to converge to the 3% target in the second quarter of next year.
Views among board members varied on the near-term policy stance. Deputy Governor Galia Borja argued that cutting the policy rate in the latest decision could hinder the disinflation process toward the 3% target. Deputy Governor Jonathan Heath said the bank should evaluate whether the present monetary policy stance is sufficient to achieve that goal.
The minutes also reported that Mexican inflation stood at 4.45% in April on a year-on-year basis. That reading was presented alongside the discussion of temporary pressures and the bank's convergence forecast.
Overall, the minutes convey a central bank that sees a sharper-than-expected slowdown in the opening quarter of the year, with multiple sectors contributing to the contraction and external demand remaining the primary support. The bank has paused its easing cycle and signalled a preference to hold rates steady while monitoring whether inflation continues on a path to the 3% target.
Summary
Banxico's minutes record a 0.8% Q1 contraction driven by weakness in industry, manufacturing and services. Exports remain resilient and the board has ended its easing cycle, guiding to maintain the reference rate at its current level as inflation is expected to fall to 3% by the second quarter of next year.