Policymakers voted 5 to 0 to raise its key rate by half a percentage point to 4.25 percent on June 30, more than expected, as the majority flagged the need to keep the slumping peso from stoking inflation.
The peso has fallen more than a third against the dollar since the beginning of November 2014 and is down more than 8 percent on the greenback this year.
The dollar gained as much as 2.7 percent against the peso at 18.7425 per dollar, the Mexican currency's lowest level since Feb. 17.
Mexico's central bank will take into account the exchange rate and the U.S. Federal Reserve's upcoming rates decision when it meets on June 30 to set monetary policy,
The central bank expects inflation to rise slightly above its 3 percent target during 2016, but fall back toward the target by the end of the year.
The peso sank as much as 0.9 percent to 18.4510 per dollar, its weakest since February.
Back in December, Mexico followed the Fed with a quarter-percentage point hike.
Mexico is expected to raise borrowing costs along with the Fed to prevent foreign investors from dumping local debt as U.S. interest rates rise.
The central bank expects inflation to rise slightly above its 3 percent target during 2016, but fall back toward the target by the end of the year.
The Mexican currency has rallied about 9 percent since the central bank delivered its half-percentage-point hike on Feb. 17.