Mexico | Banxico hints it will likely cut rates in March

Summary

A key change in the forward guidance signals that Banxico is getting ready to start a rate cut cycle as “in the next monetary policy meetings, it will assess, depending on available information, the possibility of adjusting the reference rate.”

Key points

• Key points:
• Banxico kept the policy rate unchanged at 11.25% but continued to pave the way to likely start an easing cycle in the next meeting.
• It revised upwards its short-term headline inflation expected path on “supply shocks on some specific items of the non-core component.”
• But also fine-tuned its 1Q24 core inflation forecasts to the downside and repeated that it expects the disinflation process to continue.
• We think that Banxico will cut the policy rate by 25 bps to 11.0% in the next meeting in March to avoid an unwarranted increase in the real ex-ante policy rate.
• We also think that it should not skip rate cuts at any meetings, but its cautiousness suggest that consecutive rate cuts are unlikely at the start of the easing cycle.

Geographies

Topics

Tags