Publications

A sooner resumption of easing would likely require either a more decisive weakening in the labor market or a faster-than-expected easing of tariff-driven goods inflation, potentially reinforced by a swift resolution of the current conflict in Iran.

The FOMC will most likely keep the policy rate unchanged at 3.50%-3.75% while conveying a cautious approach in light of renewed risks; we do not expect a meaningful change in the median rate projection, even if inflation forecasts move somewhat higher.

The recent military escalation in the Middle East represents a new energy crisis for the global economy. Although higher resource prices will put upward pressure on inflation, for now, a temporary slowdown rather than a deep global recession is expected.

This year, the trade agreement between Mexico, the United States, and Canada (USMCA) enters its review process. It is worth recalling that the agreement is in force until 2036, but it includes a review mechanism beginning July 1 that could lead to different scenarios.

Treasury yields declined following a softer-than-expected January headline CPI reading, which continued to indicate limited tariff pass-through. However, the inflation report also signaled that disinflation momentum in cyclical components has somewhat slowed.

On February 20, the U.S. Supreme Court, in a 6–3 decision, ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to unilaterally impose broad-based tariffs. The decision struck down most “reciprocal” and emergency tariffs.

Global Value Chains transition from hyper-efficiency to resilience in the face of geopolitical shocks and higher tariffs. Total decoupling from China is unrealistic due to its control of key inputs; connector countries like Mexico emerge that benefit from this reorganization.