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We no longer expect Banxico to cut the monetary policy rate at tomorrow’s meeting

Published on Wednesday, March 24, 2021

We no longer expect Banxico to cut the monetary policy rate at tomorrow’s meeting

We are changing our call for tomorrow’s MPC decision to pause following today’s unexpected strong core inflation print. Core inflation rose strongly, to 4.1%, in the first half of March.

Key points

  • Key points:
  • Looking ahead, headline inflation is set to increase further in March and above 5.0% in April, while core easing is unlikely to occur until late 2Q
  • Overall, the inflation release changes our call for tomorrow’s Monetary Policy Committee (MPC) meeting to pause at 4.0%
  • Yet, due to the fact that monetary policy operates with a lag, alongside the communication challenges that making more than one pause during an easing cycle would represent, we now think that the current easing cycle already ended with the monetary policy rate at 4.0%

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