Mexico, Colombia and Chile Rates: Banxico to BCCh — 2026-10-20

Top developments

Mexican Peso Strengthens on Fed Pause Expectations

On Monday, October 19, the Mexican peso (MXN) appreciated against the US dollar as investors bet that the Federal Reserve would keep rates unchanged at its October meeting. The currency traded at approximately 18.45 per dollar, reflecting relief that the interest rate differential between Mexico and the US would remain stable. Despite this short-term gain, the peso remains down 2.4% year-to-date, and analysts warn that carry trade risks persist if US inflation data forces a policy shift.

Colombian Peso Hits One-Month High

Colombia’s peso reached its strongest level in a month on October 19, supported by a stable outlook for the central bank’s key interest rate. The Banco de la República’s key rate currently stands at 12.25%, following a hike in September to combat rising inflation. Analysts expect the board to maintain this rate at its next meeting, with 16 out of 22 surveyed entities predicting no change.

Chile Central Bank Faces Pressure to Hike

In Chile, the market is increasingly pricing in the possibility that the Banco Central de Chile may raise interest rates later this year. The consultancy Gemines warned that the real exchange rate is misaligned with fundamentals, urging the central bank to consider this in its policy decisions. The central bank had previously held rates at 4.5% in September due to low local growth and Middle East tensions, but the recent dollar strength is altering expectations.

Regional Carry Trade Dynamics

The "carry trade" advantage in Latin America is thinning as the Federal Reserve maintains a tighter policy stance, according to ISI Markets. While Colombia remains a notable exception with high yields, the overall yield advantage over dollar-denominated debt is shrinking, impacting local bond markets. Meanwhile, Argentina’s carry trade has returned 19.3% in dollars so far in 2026, ranking third among emerging markets.

Local view

Local Mexican media, including El Economista and Excélsior, highlighted that the peso’s Monday appreciation was driven by a "wait-and-see" approach ahead of local inflation data and US Fed signals. El Financiero noted the volatility of the past week, describing the peso’s movement as a "mortal rise and fall" that briefly saw the dollar approach 19 pesos before settling lower. In Chile, Diario Financiero reported that the market is now openly discussing the likelihood of a rate hike, a shift from the previous consensus of holding rates steady.

Context & numbers

• Mexico: The Banxico reference rate is held at 6.50%. The peso appreciated to roughly 18.45 per USD on October 19.
• Colombia: The central bank’s key rate is 12.25%. September inflation was reported at 6.29%, the highest since July 2024, though slightly below market expectations of 6.32%.
• Chile: The central bank’s policy rate remains at 4.5% as of the last decision in September.
• Regional: Latin American carry trades are facing compression as US rates remain elevated, with Colombia being the primary outlier retaining a strong yield advantage.

On the radar

• Mexico Inflation Data: Investors are closely watching the upcoming local inflation report, which is critical for Banxico’s next policy move.
• Fed October Meeting: The Federal Reserve’s decision on rates will heavily influence the peso, Colombian peso, and other regional currencies.
• Chilean Exchange Rate: Continued pressure on the Chilean peso may force the Banco Central to reconsider its 4.5% rate policy sooner than anticipated.