An overly cautious Banxico cut its policy rate to 7.25%

Summary

There is still plenty of room to cut rates; we expect the monetary policy stance to reach neutrality by the summer of next year.

Key points

• Key points:
• Split vote with only one member voting for lowering the rate to 7.00% as opposed to two members in November
• Today’s statement reinforces our view of a gradual rate cut cycle: we expect the policy rate to reach 6.0% by August 2020
• In our opinion, a faster easing pace and a looser monetary policy stance are warranted but we expect Banxico to remain cautious

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