The Mexican peso weakened toward 17.2 per U.S. dollar after the Federal Reserve (U.S. central bank) raised interest rates, reversing from a more than two-year high of 16.98 reached on September 11th. The Fed lifted its federal funds target rate by 25 basis points to 3.75%-4.00%, as widely expected, and a majority of FOMC (Federal Open Market Committee) members projected another increase this year. The narrowing interest-rate differential is supporting the dollar. Mexico’s central bank, Banxico, left its benchmark rate unchanged at 6.50% at its August meeting. It said inflation should continue declining gradually and converge with the 3% target in the fourth quarter of 2027. Banxico also said Mexico’s economy rebounded in the second quarter after contracting in the previous quarter, while warning that downside growth risks remain. The board reiterated that it expects to keep the benchmark rate at its current level amid uncertainty surrounding geopolitical conflicts, global trade policies and their potential effects on inflation.