Summary

With the third quarter of 2026 underway, recent decisions and statements from the central banks of Brazil, Mexico, and Colombia confirm a highly cautious stance. Persistent service sector inflation and external volatility are shaping the next steps in regional monetary policy.

The Outlook at the Start of the Third Quarter

As we enter the third quarter of 2026, Latin American central banks are in a period of fine-tuning. After a prolonged cycle of high interest rates to contain price pressures, the central banks of the main economies of the Southern Cone are adjusting their decisions based on the most recent macroeconomic developments.

While headline inflation rates have shown significant reductions compared to the peaks of previous years, construction and service imports, coupled with currency behavior and the international interest rate environment, impose a rigidity that prevents accelerating reductions in the cost of money.

Recent Situation and Decisions by Country

• Brazil: Caution and Adjustments to the Pace After the June Cut

• Strategy and Stance: The Central Bank of Brazil (BCB) reduced the Selic rate to 14.25% at its June 2026 meeting. As the third quarter begins, the Monetary Policy Committee (Copom) maintains a tone of "serenity and caution," indicating that future cuts will depend closely on the evolution of inflation expectations.

• Determining Factors: The recent acceleration in certain components of core inflation and the resilience of the Brazilian labor market are supporting the cost of services. Added to this are international uncertainties affecting global financial conditions, leading the BCB to prioritize the convergence of inflation towards its target before committing to more aggressive reductions.

• Mexico: Banxico maintains rate at 6.50% prioritizing consolidation

• Strategy and stance: In its latest monetary policy decision of June 25, 2026 (effective for the beginning of Q3), the Governing Board of the Bank of Mexico (Banxico) resolved to maintain the overnight interbank interest rate at 6.50%.

• Determining factors: Banxico based its stance on the need to consolidate the downward trajectory of inflation. Although economic activity shows some slowdown, inflationary pressures in the services sector and exchange rate volatility require maintaining a restrictive approach to ensure that the price formation process remains aligned with the objective.

• Colombia: Central Bank sets prudent rate adjustment to 12.00%

• Strategy and stance: The Central Bank of Colombia set the monetary policy interest rate at 12.00% (a decision approved by majority vote at the end of June and effective from July 1, 2026), ahead of its next meeting on July 31.

• Determining factors: The Board of Directors weighed the behavior of annual inflation (which stood at 6.14% in June) against the need to avoid excessively cooling the economy. However, indexed costs in regulated services and limited room for maneuver regarding the exchange rate led the majority of the central bank to opt for prudence in its actions.

Key Factors: Services Inflation and the External Environment

Analyzing the official reports and statements issued leading up to the third quarter, two common elements stand out in the region:

• Inertia in the Services Sector: Unlike goods and food, services (transportation, corporate licenses, tourism, and rentals) maintain slower price adjustment dynamics. The importation of key inputs for the tertiary sector continues to pass exchange rate pressures on to the end consumer.

• Implicit Coordination with Global Markets: Expectations regarding the pace of rate cuts by the US Federal Reserve and global geopolitical tensions are setting a floor for Latin American interest rates. A narrow interest rate differential would risk further depreciation of local currencies, reigniting imported inflation.

Sources

1. Bank of Mexico (Banxico): Monetary Policy Announcement of June 25, 2026 (Decision to maintain the benchmark interest rate at 6.50%).

2. Central Bank of Brazil (BCB): Interest Rate Decision Statement of June 17, 2026 (Adjustment of the Selic rate to 14.25% and future guidance).

3. Central Bank of Colombia: Press Release from the Board of Directors of June 30, 2026 (Setting of the intervention rate at 12.00% effective as of July 2026).