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Banxico cuts rates but the (cautious) tone of the statement is largely unchanged

Published on Thursday, August 15, 2019 | Updated on Friday, August 16, 2019

Banxico cuts rates but the (cautious) tone of the statement is largely unchanged

In spite of relatively hawkish wording, more rate cuts are on the way.

Key points

  • Key points:
  • The majority of the Board finally comes round to the view of the need for monetary policy easing with a real ex-ante rate above 4.0% in a context of a weakening economy and falling inflation
  • Surprisingly, the tone of the statement was broadly unchanged and it remains on the relatively hawkish side
  • In spite of this, and the absence of any (and thus poor and misguiding) forward guidance, this cut should mark the start of an easing cycle
  • We continue to expect an additional 25bp rate cut (to 7.75%) before year-end and 100bp worth of cuts (to 6.75%) by year-end 2020

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