Overview
Bank of America has revised upward its forecast for Mexico's economic expansion in 2026, raising the projected annual GDP growth to 1.5% from a prior estimate of 1.2%. The bank attributes the adjustment largely to a stronger-than-expected finish to 2025 and to the potential economic upside associated with the upcoming FIFA World Cup, which Mexico will co-host with the United States and Canada.
Drivers of the revision
The research team at Bank of America highlights two influences behind the more optimistic 2026 outlook. First, incoming indicators pointed to a firmer conclusion to 2025 than earlier anticipated. Second, the World Cup - as a major international sporting event co-hosted by Mexico - is viewed as a material upside risk to next year’s economic performance. BofA’s brighter view of U.S. growth, which it projects at 2.8%, also supports a stronger outlook for Mexico.
Outlook for 2027 and structural constraints
Looking further out, the bank modestly lowered its 2027 GDP forecast to 1.6% year-over-year growth from a previous estimate of 1.8%. That downgrade is primarily attributed to base effects. BofA continues to point to weak productivity as a structural factor that will keep medium-term GDP growth relatively low.
Monetary policy expectations
On the policy front, Bank of America maintains its expectation that Mexico’s central bank, Banxico, will enact cumulative policy rate cuts of 100 basis points in 2026. The bank frames these cuts as a response to a still-weak economy alongside a relatively strong Mexican peso. It projects the policy rate at the end of 2026 will be 6.00%.
The research note outlines a likely path for easing in which rate reductions occur at alternating meetings beginning after February. Despite evidence of a recovery in the fourth quarter, analysts at Bank of America regard the probability of cuts as elevated because the output gap is expected to remain negative through 2026. However, they underscore that the timing of easing is uncertain.
Inflationary and timing uncertainties
Bank of America flags several factors that could complicate the timing of monetary easing. Those considerations include higher taxes, increased tariffs, and effects related to the World Cup, all of which could exert inflationary pressure and therefore influence policymakers’ decisions.
This analysis conveys Bank of America's published projections for Mexico's growth and monetary policy stance as described in the research note.